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:
June 30, 2016
Richard Moser
Clinton and Trump, Fear and Fascism
Pepe Escobar
The Three Harpies are Back!
Ramzy Baroud
Searching for a ‘Responsible Adult’: ‘Is Brexit Good for Israel?’
Dave Lindorff
What is Bernie Up To?
Thomas Barker
Saving Labour From Blairism: the Dangers of Confining the Debate to Existing Members
Jan Oberg
Why is NATO So Irrational Today?
John Stauber
The Debate We Need: Gary Johnson vs Jill Stein
Steve Horn
Obama Administration Approved Over 1,500 Offshore Fracking Permits
Rob Hager
Supreme Court Legalizes Influence Peddling: McDonnell v. United States
Norman Pollack
Economic Nationalism vs. Globalization: Janus-Faced Monopoly Capital
Binoy Kampmark
Railroaded by the Supreme Court: the US Problem with Immigration
Howard Lisnoff
Of Kiddie Crusades and Disregarding the First Amendment in a Public Space
Vijay Prashad
Economic Liberalization Ignores India’s Rural Misery
Caroline Hurley
We Are All Syrians
June 29, 2016
Diana Johnstone
European Unification Divides Europeans: How Forcing People Together Tears Them Apart
Andrew Smolski
To My Less-Evilism Haters: A Rejoinder to Halle and Chomsky
Jeffrey St. Clair
Noam Chomsky, John Halle and a Confederacy of Lampreys: a Note on Lesser Evil Voting
David Rosen
Birth-Control Wars: Two Centuries of Struggle
Sheldon Richman
Brexit: What Kind of Dependence Now?
Yves Engler
“Canadian” Corporate Capitalism
Lawrence Davidson
Return to the Gilded Age: Paul Ryan’s Deregulated Dystopia
Priti Gulati Cox
All That Glitters is Feardom: Whatever Happens, Don’t Blame Jill Stein
Franklin Lamb
About the Accusation that Syrian and Russian Troops are Looting Palmyra
Binoy Kampmark
Texas, Abortion and the US Supreme Court
Anhvinh Doanvo
Justice Thomas’s Abortion Dissent Tolerates Discrimination
Victor Grossman
Brexit Pro and Con: the View From Germany
Manuel E. Yepe
Brazil: the Southern Giant Will Have to Fight
Rivera Sun
The Nonviolent History of American Independence
Adjoa Agyeiwaa
Is Western Aid Destroying Nigeria’s Future?
Jesse Jackson
What Clinton Should Learn From Brexit
Mel Gurtov
Is Brexit the End of the World?
June 28, 2016
Jonathan Cook
The Neoliberal Prison: Brexit Hysteria and the Liberal Mind
Paul Street
Bernie, Bakken, and Electoral Delusion: Letting Rich Guys Ruin Iowa and the World
Anthony DiMaggio
Fatally Flawed: the Bi-Partisan Travesty of American Health Care Reform
Mike King
The “Free State of Jones” in Trump’s America: Freedom Beyond White Imagination
Antonis Vradis
Stop Shedding Tears for the EU Monster: Brexit, the View From the Peloponnese
Omar Kassem
The End of the Atlantic Project: Slamming the Brakes on the Neoliberal Order
Binoy Kampmark
Brexit and the Neoliberal Revolt Against Jeremy Corbyn
Doug Johnson Hatlem
Alabama Democratic Primary Proves New York Times’ Nate Cohn Wrong about Exit Polling
Ruth Hopkins
Save Bear Butte: Mecca of the Lakota
Celestino Gusmao
Time to End Impunity for Suharto’’s Crimes in Indonesia and Timor-Leste
Thomas Knapp
SCOTUS: Amply Serving Law Enforcement’s Interests versus Society’s
Manuel E. Yepe
Capitalism is the Opposite of Democracy
Winslow Myers
Up Against the Wall
Chris Ernesto
Bernie’s “Political Revolution” = Vote for Clinton and the Neocons
FacebookTwitterGoogle+RedditEmail