The last few years have been replete with stories of fraudulent and possibly criminal acts for banks in the mortgage crisis. Thousands have lost their homes and faced financial ruin. The Administration is yielding to demands from lobbyists for the banks and particularly targeting Eric T. Schneiderman, the attorney general of New York, in demanding support for a deal that would offer just civil fines rather than criminal penalties.
Various organizations have denounced the actions of the Obama Administration as caving into this powerful lobby — as it has caved into the oil/gas lobby on offshore drilling, pharmaceutical lobby on health care legislation, and telecom lobby on immunity from privacy lawsuits.
Schneiderman and other state prosecutors want to hold bank officials liable for the harm that they have caused. They believe there are strong cases for criminal prosecution. Shaun Donovan, the secretary of Housing and Urban Development, and various other Administration officials have been pressuring the states to give the industry a pass on any crimes. Bank officials are known to have contacted Donovan and other Administration officials to pressure prosecutors. The industry (and the Obama Administration) wants to force attorneys general to grant waivers from criminal liability in exchange for civil fines.
Among other possible cases, Schneiderman objects to giving a pass to New York Mellon and Bank of America that would cover 530 mortgage-backed securities containing allegedly fraudulent Countrywide Financial loans.
Source: NYT
Paul Simon’s “There Must Be 50 Ways To Leave Your Lover” comes to mind for some reason.
Obama continues to trend downward, for two years running now.
Not surprising.
Also from Taibbi–last fall:
Invasion of the Home Snatchers
Matt Taibbi on how foreclosure courts are helping big banks screw over homeowners
Rolling Stone (November 25, 2010 Issue)
http://www.rollingstone.com/politics/news/matt-taibbi-courts-helping-banks-screw-over-homeowners-20101110
Excerpt:
The foreclosure lawyers down in Jacksonville had warned me, but I was skeptical. They told me the state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase. This “rocket docket,” as it is called in town, is presided over by retired judges who seem to have no clue about the insanely complex financial instruments they are ruling on — securitized mortgages and labyrinthine derivative deals of a type that didn’t even exist when most of them were active members of the bench. Their stated mission isn’t to decide right and wrong, but to clear cases and blast human beings out of their homes with ultimate velocity. They certainly have no incentive to penetrate the profound criminal mysteries of the great American mortgage bubble of the 2000s, perhaps the most complex Ponzi scheme in human history — an epic mountain range of corporate fraud in which Wall Street megabanks conspired first to collect huge numbers of subprime mortgages, then to unload them on unsuspecting third parties like pensions, trade unions and insurance companies (and, ultimately, you and me, as taxpayers) in the guise of AAA-rated investments. Selling lead as gold, shit as Chanel No. 5, was the essence of the booming international fraud scheme that created most all of these now-failing home mortgages.
The rocket docket wasn’t created to investigate any of that. It exists to launder the crime and bury the evidence by speeding thousands of fraudulent and predatory loans to the ends of their life cycles, so that the houses attached to them can be sold again with clean paperwork. The judges, in fact, openly admit that their primary mission is not justice but speed. One Jacksonville judge, the Honorable A.C. Soud, even told a local newspaper that his goal is to resolve 25 cases per hour. Given the way the system is rigged, that means His Honor could well be throwing one ass on the street every 2.4 minutes.
Foreclosure lawyers told me one other thing about the rocket docket. The hearings, they said, aren’t exactly public. “The judges might give you a hard time about watching,” one lawyer warned. “They’re not exactly anxious for people to know about this stuff.” Inwardly, I laughed at this — it sounded like typical activist paranoia. The notion that a judge would try to prevent any citizen, much less a member of the media, from watching an open civil hearing sounded ridiculous. Fucked-up as everyone knows the state of Florida is, it couldn’t be that bad. It isn’t Indonesia. Right?
Well, not quite. When I went to sit in on Judge Soud’s courtroom in downtown Jacksonville, I was treated to an intimate, and at times breathtaking, education in the horror of the foreclosure crisis, which is rapidly emerging as the even scarier sequel to the financial meltdown of 2008: Invasion of the Home Snatchers II. In Las Vegas, one in 25 homes is now in foreclosure. In Fort Myers, Florida, one in 35. In September, lenders nationwide took over a record 102,134 properties; that same month, more than a third of all home sales were distressed properties. All told, some 820,000 Americans have already lost their homes this year, and another 1 million currently face foreclosure.
Throughout the mounting catastrophe, however, many Americans have been slow to comprehend the true nature of the mortgage disaster. They seemed to have grasped just two things about the crisis: One, a lot of people are getting their houses foreclosed on. Two, some of the banks doing the foreclosing seem to have misplaced their paperwork.
For most people, the former bit about homeowners not paying their damn bills is the important part, while the latter, about the sudden and strange inability of the world’s biggest and wealthiest banks to keep proper records, is incidental. Just a little office sloppiness, and who cares? Those deadbeat homeowners still owe the money, right? “They had it coming to them,” is how a bartender at the Jacksonville airport put it to me.
But in reality, it’s the unpaid bills that are incidental and the lost paperwork that matters. It turns out that underneath that little iceberg tip of exposed evidence lies a fraud so gigantic that it literally cannot be contemplated by our leaders, for fear of admitting that our entire financial system is corrupted to its core — with our great banks and even our government coffers backed not by real wealth but by vast landfills of deceptively generated and essentially worthless mortgage-backed assets.
You’ve heard of Too Big to Fail — the foreclosure crisis is Too Big for Fraud. Think of the Bernie Madoff scam, only replicated tens of thousands of times over, infecting every corner of the financial universe. The underlying crime is so pervasive, we simply can’t admit to it — and so we are working feverishly to rubber-stamp the problem away, in sordid little backrooms in cities like Jacksonville, behind doors that shouldn’t be, but often are, closed.
Mike,
In that light, let me amend my boo! with “Good on you Attorney General Schneiderman”
From Matt Taibbi–earlier this year:
Why Isn’t Wall Street in Jail?
Financial crooks brought down the world’s economy — but the feds are doing more to protect them than to prosecute them
Rolling Stone (March 3, 2011 Issue)
http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216
Excerpt:
Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.
“Everything’s fucked up, and nobody goes to jail,” he said. “That’s your whole story right there. Hell, you don’t even have to write the rest of it. Just write that.”
I put down my notebook. “Just that?”
“That’s right,” he said, signaling to the waitress for the check. “Everything’s fucked up, and nobody goes to jail. You can end the piece right there.”
Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world’s wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.
The rest of them, all of them, got off. 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. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What’s more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even “one dollar” just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick “The Gorilla” Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.
Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. “If the allegations in these settlements are true,” says Jed Rakoff, a federal judge in the Southern District of New York, “it’s management buying its way off cheap, from the pockets of their victims.”
To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. “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.”
But that hasn’t happened. Because the entire system set up to monitor and regulate Wall Street is fucked up.
Just ask the people who tried to do the right thing.
Eric Schneiderman sent the following E Mail to his supporters today:
“Dear Friend,
You might have been following the latest developments related to the national settlement of the mortgage probe, including this story in today’s Huffington Post about our tough fight for a comprehensive resolution to this crisis.
Let me tell you directly: I am deeply committed to pursuing a full investigation into the misconduct that led to the collapse of America’s housing market, and to seeking a resolution that gives homeowners meaningful relief, allows the housing market to begin to recover, and gets our economy moving again.
Our ongoing investigation into the housing crisis cannot be shut down to accommodate efforts to settle quickly and give banks and others broad immunity from further legal action. If you have any thoughts or concerns about this critical issue, please contact me at 1-800-771-7755, or send a message via Facebook or Twitter.
Thank you for your support,
Eric T. Schneiderman
Attorney General”
He is standing firm despite the pressure being put on him by the administration. As I’ve stated elsewhere here I’ve met Eric and followed his career closely, I believe that he will continue to stand firm.
Jonathan,
Here are more stories on this subject that I left previously on my S.E.C. post:
From Glenn Greenwald at Salon. His post has links to other interesting articles:
Obama administration takes tough stance on banks
http://www.salon.com/news/opinion/glenn_greenwald/2011/08/22/banks/index.html
Excerpt:
In mid-May, I wrote about the commendable — one might say heroic — efforts of New York Attorney General Eric Schneiderman to single-handedly impose meaningful accountability on Wall Street banks for their role in the 2008 financial crisis and the mortgage fraud/foreclosure schemes. Not only was Schneiderman launching probing investigations at a time when the Obama DOJ was steadfastly failing to do so, but — more importantly — he was refusing to sign onto a global settlement agreement being pushed by the DOJ that would have insulated the mortgage banks (including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo) from all criminal investigations in exchange for some relatively modest civil fines. In response, many commenters wondered whether Schneiderman, if he persisted, would be targeted by the banks with some type of campaign of destruction of the kind that brought down Eliot Spitzer, but fortunately for the banks, they can dispatch their owned servants in Washington to apply the pressure for them…
**********
Corrupt Obama Administration Pressuring New York Attorney General to Support Mortgage Whitewash
by Yves Smith
Naked Capitalism
http://www.nakedcapitalism.com/2011/08/corrupt-obama-administration-pressuring-new-york-attorney-general-to-support-mortgage-whitewash.html
Excerpt:
It is high time to describe the Obama Administration by its proper name: corrupt.
Admittedly, corruption among our elites generally and in Washington in particular has become so widespread and blatant as to fall into the “dog bites man” category. But the nauseating gap between the Administration’s propaganda and the many and varied ways it sells out average Americans on behalf of its favored backers, in this case the too big to fail banks, has become so noisome that it has become impossible to ignore the fetid smell.
The Administration has now taken to pressuring parties that are not part of the machinery reporting to the President to fall in and do his bidding. We’ve gotten so used to the US attorney general being conveniently missing in action that we have forgotten that regulators and the AG are supposed to be independent. As one correspondent noted by e-mail, “When officials allegiances are to El Supremo rather than the Constitution, you walk the path to fascism.”
Revealingly, one of the Administration’s allies said: “Wall Street is our Main Street.” And the worst is that this remark may not be a cynical Ministry of Truth pronouncement. Team Obama bears all the hallmarks of being so close to banks and big corporations that it has lost all contact with and understanding of mainstream America.
The latest example is its heavy-handed campaign to convert New York state attorney general Eric Schneiderman to a card carrying member of the “be nice to our lords and masters the banksters” club. Schneiderman was the first to take issue with the sham of the so-called 50 state attorney general mortgage settlement. As far as the Administration is concerned, its goal is to give banks a talking point and prove to them that Team Obama is protecting their backs in a way that the chump public hopefully won’t notice.
The Administration joined this effort to hurry it forward and assure it resulted in a suitably financier-friendly outcome. And it has done so despite recent HUD inspector general’s audits finding that the five biggest servicers were defrauding taxpayers. We’ve heard not a peep of follow up on that front; instead, the Administration keeps leaking its tired “A settlement is just around the corner” story.
Schneiderman is far from the only person to see what a sellout this “settlement” is. The basic premise of a settlement is to obtain some sort of restitution to induce a prosecutor/plaintiff to drop a current or likely lawsuit. For the aggrieved party to get a good settlement, it needs to have a credible case, as in facts (a smoking gun or two) and a legal theory as to why those facts mean the perp is in hot water.
slarti, The choice is between not that great and very very bad. Remember, I live in Perry’s state.
Swarthmore mom,
I’m a big believer in Heinlein’s aphorism about the choice between bad and worse being much more important than the choice between good and better and this one’s shaping up to be a doozy!
p.s. Civil penalties would be fine – as long as they included restoring every family that was foreclosed on to their home (or a home of similar value) and giving them the mortgage free and clear. Anything less is an insult to the pain and suffering they caused.
http://tpmdc.talkingpointsmemo.com/2011/08/perry-takes-the-lead-for-gop-nomination-in-two-national-polls.php?ref=fpa it shaping up to be Perry vs. Obama.
The bums should be doing the perp walk right now. Somebody in the Democratic Party has to take President Obama aside and set him straight. This is outrageous.
O.S.-
That video shows what I just did after reading this article- including the thumb sucking and the crying!
Apparently they don’t tech Ethics as I did elsewhere, at Harvard Law..!
What the fuck do they teach up there at Harvard Law anyway..?
I guess Lawrence Tribe taught how to suck up to corrupt bankers and screw the working class as a tutorial to Obama..!
MerryMarjie-
You beat me to the punch. I was going to ask if anyone remembered anything that has happened since January 20, 2009 where President Obama was on OUR side. This is why he is in serious need of a Primary challenge from the left to wake him up and remind him who elected him the first time. As a Progressive, I’m tired of being sneered at by a phony “Liberal” and a phony “Constitutional scholar”. I have known now for a long time who he really is, and that he will never get my vote again.
As we all know, lawyers were among the people who caused the problems.
In 2002, I included the ABA as a defendant when I sued a bunch of lawyers and I argued basically that they over protected lawyers in various ways including pretending that lawyers were immune from civil lawsuit. That was not well received. The lawyers and magistrate were like “ha ha ha — lawyers have immunity when employed as an advocate”. So if I had made some progress 8 or 9 years ago maybe the mortgage fraud problem would have been smaller in magnitude.
Obama got a lot of $ from the financial sector in the 2008 campaign. Recently, the Romney campaign has been trumpeting how much the sector is giving to him. I wonder.. If Wall Street abandons Obama in this election round, would that change the political calculus enough for something to happen?
The Obama administration has clearly made the political calculation that prosecuting people for the financial crimes that contributed to the global economic crisis would be bad for the administration and the Democratic party in the short to mid term. They’re right, of course – the Republicans would claim that such prosecutions would “kill jobs”, “frighten the job creating class” and such. (Subtext, “Them Wall Street types is yer easy money lottery ticket! They dun make money out of thin air, an som’ uv it done gunna trickle down to you! Plus, Jesus loves rich folks more, so it’s God’s will! And Obama, that godless Muslim CommiFascist ni… ni…. uh, Kenyan dun messed up the magic money makin’!”)
None of this is to say that there aren’t plenty of Democrats who are on Wall Street’s payroll…
But… If the financial sector really is withdrawing its support for Obama, and moving it to Romney, and Obama looses in 2012, does Obama have the guts to stick it to them on his way out? Certainly, he’s got a lot of company among fellow weak-kneed Democrats who, despite this hypothetical political defeat, would be terrified to shiv the bastards. But it might be tough for an outgoing administration to put much pressure on state prosecutors with stacks of evidence…
Those lobbyists! Again!
Realistically, our prisons mightn’t be large enough to accommodate all the criminals in the financial and mortgage frauds, plus the upkeep of prisoners is mainly a taxpayer expense. Whatever happened to work gangs?
Therefore I suggest the following :
1. Civil penalities up to treble the damage of each lost home, or $2m, whichever is greater.
2. At least 2,000 hours community service – preferably serving the homeless and cleaning up streets, parks and graffiti.
3. Losing their licenses and being banned from working in the financial industry ever again. Perhaps they can take some of their ill gotten gains and start manufacturing businesses in mid-America and work to re-build economy and the middle class.
There are creative solutions to this problem. The lobbyists invalidating the rights of the people and helping criminals escape accountability are the bigger problem.
President Obama needs to stand up for the people and show he can stand strong against the lobbyists. The HUD Secretary needs to be replaced, either by tendering his resignation (no golden parachute, please) OR being fired (no unemployment, please).
Arizona’s Sheriff Arpaio might be a good HUD Secretary – he’d know what to do with those pesky lobbyists.
What Gyges said, but I do add this editorial opinion:
Sometimes I feel I’m back in the 2000 -2008 years. For every “atta-boy” that I give Obama, there are two more of these decisions, where my jaw drops and my heart sinks. Whose side is he on?
Ahem…
Booo!
That is all.