FacebookTwitterGoogle+RedditEmail

Foreclosure Settlement: Just Another Link In a Long Chain of Corruption

by PAM MARTENS

Yesterday the Department of Justice and 49 state attorneys general announced the long anticipated $25 billion deal with 5 large Wall Street firms — Bank of America Corporation,  JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. — to settle foreclosure and mortgage servicing abuses.  Unfortunately, the settlement is not yet 24 hours old and cracks are emerging.

Each major corruption settlement with Wall Street, and they are legion over the past 15 years, triggers a commemorative magazine cover.  I keep some favorites handy.

The October 1996 cover of  Registered Representative Magazine, the trade magazine for financial consultants and stock brokers, blared in 48 point bold red type: “How the NASD Was Corrupted.”  That issue focused on the years of price fixing of stocks traded on the Nasdaq market by the biggest firms on Wall Street while the self regulatory body, the National Association of Securities Dealers, was dominated by the same firms and looked the other way.  (Think SEC today.)

The Department of Justice, then under Janet Reno, had this to say about the settlement: “We have found substantial evidence of coercion and other misconduct in this industry.  By providing for the random monitoring of traders’ telephone calls, we expect to deter future price fixing on Nasdaq.”  At the time, Reno said the “law does not provide the Department with statutory authority to recover damages or monetary penalties in such cases.”

The next big corruption probe drew a giant green serpent wrapped around the street sign for Wall Street on the cover of BusinessWeek with the rhetorical  question: “Wall Street: How Corrupt Is It?”  That settlement collectively cost the big firms $1.4 billion for peddling fake stock research to the public to induce investors to buy bad companies while the same  analysts called the firms  “dogs” and “crap” in internal emails.  The announcement of the deal came on April 28, 2003 from the SEC, the New York Attorney General of that day, Eliot Spitzer, the NASD, the New York Stock Exchange and state securities regulators — all gushing over how great this deal was for the public and how it was going to reform Wall Street.

New York Magazine has found an odd way of commemorating the crumbs available to illegally evicted and displaced children and families under the current settlement.   The current magazine cover has a Wall Street guy clasping his… uh…private portfolio…with the headline: “The
Emasculation of Wall Street.”  If Wall Street is being emasculated, you sure can’t tell it from yesterday’s settlement.

Not only did Wall Street settle its robo-signing, illegal foreclosures and servicing problems with the Department of Justice and 49 state attorneys  general (Oklahoma settled independently) but lost in the headlines was that the two major regulators of national banks, the Office of the Comptroller of the Currency (OCC) and the Federal Reserve, also settled with the biggest Wall Street banks in a decidedly cozy deal that effectively lets them off without a monetary fine as long as they pay under the federal-state settlement agreement.

The OCC settled with Bank of America, Citibank, JPMorgan Chase, and Wells Fargo for a combined $394 million but here’s the cozy part: “the OCC agrees to hold in abeyance imposition of such penalties provided the servicers make payments and take other actions under the federal-state settlement with a value equal to at least the penalty amounts that each servicer acknowledges that the OCC could impose…”

The Federal Reserve issued monetary sanctions of $766.5 million against the parent holding companies: Bank of America Corp., Citigroup Inc., Ally Financial, Inc., JPMorgan Chase & Co., and Wells Fargo & Co. and two mortgage servicers GMAC Mortgage, LLC a subsidiary of Ally Financial, Inc., and EMC Mortgage Corporation, a subsidiary of JPMorgan Chase & Co.   But again, the Wall Street firms can get off the hook for paying these sums by simply paying them under the $25 billion federal-state settlement.

The specifics of just what the state attorneys general agreed to is unknown, even to some of the attorneys general.  According to the web site set up to inform the public about the settlement both the primary “Settlement Document” and the “Executive Summary” will be “coming soon.”  Without those documents available for public perusal, there is the reasonable suspicion that the public has once again been feted to lipstick on a pig, as they like to say on Wall Street.

One striking problem is that California Attorney General Kamala D. Harris states on her web site and in this video that California is getting $18 billion.  Florida Attorney General Pam Bondi
says on her web site that Florida is receiving $8.4 billion.  Those two amounts would leave a negative figure for the other 47 states that agreed to the $25 billion deal.

There’s also something peculiar about the Federal Department of Justice and 49 states setting up an informational web site that ends in .com instead of .gov.  Register.com shows the web site has used a privacy shield to block the name of the owner of the site.

Corporate media is reporting that the deal settles only foreclosure and servicing abuses.  But this web site states: “The agreement settles only some aspects of the banks conduct related to the financial crisis (foreclosure practices, loan servicing, and origination of loans) in return for the second largest state attorneys general recovery in history and direct relief to distressed borrowers while they can still use it.”  The Florida Attorney General concedes on her web site that the deal with the state includes loan origination issues.  That may not sit well with residents of a state where massive loan origination frauds occurred.

I called the AG’s office in Massachusetts – historically a tough regulator when it comes to Wall Street.  The spokesperson could not answer why loan origination is included on the settlement web site.

Why is mortgage loan origination a big deal?  Because tens of thousands of consumers were victimized in a bait and switch racket, believing they were getting a fixed rate mortgage only to find out a few years down the road that they had an adjustable rate mortgage that reset and doubled or even tripled their monthly payment – making it impossible to stay in their home; an effective wealth stripping enterprise by Wall Street against decent, hardworking families across America.

Other abuses in loan origination abounded.  The Federal Trade Commission took this testimony from Michele V. Handzel, a former Branch Manager for CitiFinancial, a unit of Citigroup.  Ms. Handzel is comparing the practices of CitiFinancial after it acquired another firm, The Associates.

“CitiFinancial put much more pressure on employees than the Associates did to include as many credit insurance and ancillary products as possible on every loan….In fact, I feel that the credit insurance sales practices at CitiFinancial were worse than at The Associates.  From January to June 2001, the policy was that no personal loan at CitiFinancial would be approved if it did not include some type of credit insurance, nor would a real estate loan be approved without some type of ancillary product…There were several internal measures in place to effectuate this policy.  For instance, District Managers would frequently refuse to send a loan to underwriting if it did not include some type of insurance product.  Moreover, loans that were closed and did not include any insurance would be identified by CitiFinancial’s internal insurance auditors, and the employee who closed the loan would be written up…Closings at CitiFinancial resembled those at The Associates – they were brief.  Personal loan closings took approximately 10 minutes.  Real estate loan closings took a little longer but also did not provide a lot of details about the loan.  At CitiFinancial, I was instructed to do a ‘closed folder’ closing, meaning that information would be discussed orally first.  Only after the borrower indicated that he wanted to sign would the employee open the folder and have the borrower sign the papers.”

In the past, Wall Street knew it could steal billions and settle with its easily maneuvered regulators for millions.  It did this time and time again, never having to admit to any crime.  Wall Street translated this to mean that crime was a lucrative profit center.  This latest settlement raises the potential of this profit center.  Wall Street now understands that it can steal trillions and settle for billions.

And just why is it that the Feds can’t or won’t prosecute the biggest of the Wall Street firms?  Because they are the Federal Government’s bond brokers, the primary dealers who contractually agree to buy Treasury bills or notes or bonds  at every U.S. Treasury auction.  They may be serially corrupt, but Uncle Sam needs those contractual guarantees of its primary dealers to be sure it can pull off its debt auctions.  And the U.S. government cannot engage in contracts with convicted financial felons.

And it won’t break up these bloated behemoths because big balance sheets are just what a government with $15 trillion in debt is looking for in a bond broker.

Pam Martens worked on Wall Street for 21 years. She spent the last decade of her career advocating against Wall Street’s private justice system, which keeps its crimes shielded from public courtrooms.  She maintains, along with Russ Martens, an ongoing archive dedicated to this financial era at  www.WallStreetOnParade.com. She has no security position, long or short, in any company mentioned in this article.  She is a contributor to Hopeless: Barack Obama and the Politics of Illusion, forthcoming from AK Press. She can be reached at pamk741@aol.com

Related articles:

The Next Financial Crisis Hits Wall Street, As Judges Start Nixing Foreclosures

A Secret Deal Between Wall Street and Washington Shines a Harsh Light on Federal Housing Agency

 

 

Pam Martens has been a contributing writer at CounterPunch since 2006. Martens writes regularly on finance at www.WallStreetOnParade.com.

More articles by:
Weekend Edition
July 22, 2016
Friday - Sunday
Jeffrey St. Clair
Good as Goldman: Hillary and Wall Street
Joseph E. Lowndes
From Silent Majority to White-Hot Rage: Observations from Cleveland
Paul Street
Political Correctness: Handle with Care
Richard Moser
Actions Express Priorities: 40 Years of Failed Lesser Evil Voting
Eric Draitser
Hillary and Tim Kaine: a Match Made on Wall Street
Conn Hallinan
The Big Boom: Nukes And NATO
Ron Jacobs
Exacerbate the Split in the Ruling Class
Jill Stein
After US Airstrikes Kill 73 in Syria, It’s Time to End Military Assaults that Breed Terrorism
Jack Rasmus
Trump, Trade and Working Class Discontent
John Feffer
Could a Military Coup Happen Here?
Jeffrey St. Clair
Late Night, Wine-Soaked Thoughts on Trump’s Jeremiad
Andrew Levine
Vice Presidents: What Are They Good For?
Michael Lukas
Law, Order, and the Disciplining of Black Bodies at the Republican National Convention
Victor Grossman
Horror News, This Time From Munich
Margaret Kimberley
Gavin Long’s Last Words
Mark Weisbrot
Confidence and the Degradation of Brazil
Brian Cloughley
Boris Johnson: Britain’s Lying Buffoon
Lawrence Reichard
A Global Crossroad
Kevin Schwartz
Beyond 28 Pages: Saudi Arabia and the West
Charles Pierson
The Courage of Kalyn Chapman James
Michael Brenner
Terrorism Redux
Bruce Lerro
Being Inconvenienced While Minding My Own Business: Liberals and the Social Contract Theory of Violence
Mark Dunbar
The Politics of Jeremy Corbyn
David Swanson
Top 10 Reasons Why It’s Just Fine for U.S. to Blow Up Children
Binoy Kampmark
Laura Ingraham and Trumpism
Uri Avnery
The Great Rift
Nicholas Buccola
What’s the Matter with What Ted Said?
Aidan O'Brien
Thank Allah for Western Democracy, Despondency and Defeat
Joseph Natoli
The Politics of Crazy and Stupid
Sher Ali Khan
Empirocracy
Nauman Sadiq
A House Divided: Turkey’s Failed Coup Plot
Franklin Lamb
A Roadmap for Lebanon to Grant Civil Rights for Palestinian Refugees in Lebanon
Colin Todhunter
Power and the Bomb: Conducting International Relations with the Threat of Mass Murder
Michael Barker
UK Labour’s Rightwing Select Corporate Lobbyist to Oppose Jeremy Corbyn
Graham Peebles
Brexit, Trump and Lots of Anger
Anhvinh Doanvo
Civilian Deaths, Iraq, Syria, ISIS and Drones
Christopher Brauchli
Kansas and the Phantom Voters
Peter Lee
Gavin Long’s Manifesto and the Politics of “Terrorism”
Missy Comley Beattie
An Alarmingly Ignorant Fuck
Robert Koehler
Volatile America
Adam Vogal
Why Black Lives Matter To Me
Raouf Halaby
It Is Not Plagiarism, Y’all
Rev. Jeff Hood
Deliver Us From Babel
Frances Madeson
Juvenile Life Without Parole, Captured in ‘Natural Life’
Charles R. Larson
Review: Han Kang’s “The Vegetarian”
FacebookTwitterGoogle+RedditEmail