Foreclosure Settlement: Just Another Link In a Long Chain of Corruption
Why the Feds Won’t Prosecute the Big Wall Street Banks
By PAM MARTENS | CounterPunch | February 10, 2012
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 CounterPunch 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
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Obama: “The Devil” Made Me Take the Super Pac Money
A Black Agenda Radio commentary by Glen Ford | February 7, 2012
President Obama is like comedian Flip Wilson’s character, Geraldine: He blames everything on the Devil. The Devil made him do it.
And so, the Devil has just forced Mr. Obama to put together his own infernal Super Pac, the demon-spawn of the Supreme Court’s Citizen’s United decision allowing corporations and wealthy individuals to spend as much money as they like on elections. Only days ago, Obama was calling Super Pacs a “threat to democracy,” but that was then, and now it’s time to make sure that the president has an equal opportunity to join in the corruption. But, don’t blame Obama. The Koch brothers made him do it, with reports that the far-right siblings plan to gather $100 million in Super Pac money. As Geraldine would say, those Koch Devils made Obama do it.
Not that there’s any danger of Obama being outspent in his re-election bid. He’s raised more money than all the Republican candidates, combined. In fact, he’s raised a lot more money from employees of Mitt Romney’s private equity firm, Bain Capital, than Romney has. All indications are that Obama will win the race for Wall Street’s campaign contributions, hands down, no matter who the Republicans nominate, just as Wall Street preferred Obama to John McCain, four years ago.
Candidate Obama opted out of public financing in the 2008 campaign, the first president since Watergate to run without public funding. He had earlier promised to accept public financing, and the limits on spending that go with it, if McCain did. McCain kept his part of the bargain, but Obama was getting more money than he could bring himself to turn down. In fact, by that time, Obama had raised twice as much as McCain, so he couldn’t claim a disadvantage. Instead, Obama’s excuse was that the public financing system was “broken.” But, of course, it was Obama’s withdrawal that definitively broke the system, paving the way for the billion dollar election of 2012.
In the summer of 2007, Obama explained the difference between himself and all of his Democratic and Republican opponents, when it comes to taking money from the rich and greedy. “The argument is not that I’m pristine, because I’m swimming in the same muddy water,” he said. “The argument is that I know it’s muddy and I want to clean it up.” But there is no evidence that Obama wants to clean up campaign financing, only that he finds all kinds of excuses to take the money.
The Wall Street crowd loves Obama, and they show it with their checkbooks. He returns their love a thousand times over, by protecting their interests while skillfully hoodwinking the Democratic base into believing that he’s on their side. The most pitiful marks in this hustle are small contributors, who Obama claims are his real base of support. Back in 2008, he even claimed that his fundraising was a better reflection of democracy than public financing, because he had so many small contributors. But it turns out that Obama got almost exactly the same proportion of his campaign funds from the little guys as George Bush did, in 2004.
It’s a rich man’s game, in which the future of the country and the world is purchased cheaply with campaign contributions. It is common sense that the player that collects the most money, has also sold the most influence. This election year, just like last time, the top influence seller is Barack Obama.
Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.
Lying About the Harlem Protest Against Obama
A Black Agenda Radio commentary by Glen Ford | January 24, 2012
Last Thursday’s demonstration, in New York’s Harlem, against President Obama’s foreign and domestic policies was a great success, with about 400 protesters massed across the street from an Obama fundraiser at the Apollo Theater. But, you would not know that from reading the Daily Kos or In These Times, or from watching Democracy Now! That’s because these outfits represent the left flank of Obama’s apologists and protectors, whose self-assigned job is to perpetuate the fantasy that the First Black President is not a servant of Wall Street and the Pentagon. These publications and programs are also in thrall to another fantasy: that they have some kind of entree or influence with the Obama administration, when in fact, this White House is an annex of finance capital.
Nellie Bailey, the veteran Harlem organizer and member of Occupy Harlem, has already set the record straight: that this was a Black-led demonstration called for by Occupy Harlem, which enlisted the support of the larger Occupy Movement, Stop Stop-and-Frisk, MoveOn, the Black Is Back Coalition, and other progressive organizations. The turnout was larger than even the organizers had hoped, and heavily Black and Latino. But Democracy Now!, whose politics has undergone a palpable turn to the right during Obama’s time in office, told its audience that only about 100 people protested, when in reality, the MoveOn section of the demonstration alone approached that number. In this sense, Democracy Now! is worse than the police at reporting demonstrations it doesn’t support.
Daily Kos, which often behaves like an arm of the administration, published the rantings of someone calling himself Brooklyn Bad Boy, who admits he isn’t a “fan of street protests” but goes ballistic over the effrontery of protesting Obama. He claims the demonstrators ignore the pro-banker policies of Republican candidates. But then, the Brooklyn Bad Boy doesn’t show up at too many demonstrations, by his own admission, so how would he know? No matter, his pro-Obama stance qualifies for space on Daily Kos.
Allison Kilkenny’s In These Times article was the most insidious example of a hit-piece. She offered no crowd estimate, but made reference to a “handful” of Occupy Wall Street activists, thus belittling the turnout. Much worse, Kilkenny highlighted the uninvited presence of a few Lyndon LaRouche supporters in order to tar the whole demonstration – as if Occupy Harlem can dictate who shows up on the street. Then Kilkenny – a white woman – argues that white people from Occupy Wall Street should have stayed away from Harlem, on the grounds that their presence did not take “into account the city’s tense race relations” and the fierce gentrification of the neighborhood – gentrification fueled by Wall Street bankers.
As Occupy Harlem’s Nellie Bailey writes, Kilkenny is talking like old school southern white racists, accusing whites in Occupy Wall Street of being “outside agitators.” Kilkenny doesn’t think Black progressives have the right to ask white and Latino progressives to attend Black-led demonstrations in Black neighborhoods. She wants a segregated Occupy Wall Street movement, in which Blacks that oppose Obama’s corporate policies would get no meaningful solidarity from whites in the movement. Or, maybe she’ll just say anything to avoid confronting the corporate president.
BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.
Social Security Will Fall To Obama Before The Taliban Do
By Paul Craig Roberts | February 18, 2010
Hank Paulson, the Gold Sacks bankster/US Treasury Secretary, who deregulated the financial system, caused a world crisis that wrecked the prospects of foreign banks and governments, caused millions of Americans to lose retirement savings, homes, and jobs, and left taxpayers burdened with multi-trillions of dollars of new US debt, is still not in jail. He is writing in the New York Times urging that the mess he caused be fixed by taking away from working Americans the Social Security and Medicare for which they have paid in earmarked taxes all their working lives.
Wall Street’s approach to the poor has always been to drive them deeper into the ground.
As there is no money to be made from the poor, Wall Street fleeces them by yanking away their entitlements. It has always been thus. During the Reagan administration, Wall Street decided to boost the values of its bond and stock portfolios by using Social Security revenues to lower budget deficits. Wall Street figured that lower deficits would mean lower interest rates and higher bond and stock prices.
Two Wall Street henchmen, Alan Greenspan and David Stockman, set up the Social Security raid in this way: The Carter administration had put Social Security in the black for the foreseeable future by establishing a schedule for future Social Security payroll tax increases. Greenspan and Stockman conspired to phase in the payroll tax increases earlier than was needed in order to gain surplus Social Security revenues that could be used to finance other government spending, thus reducing the budget deficit. They sold it to President Reagan as “putting Social Security on a sound basis.”
Along the way Americans were told that the surplus revenues were going into a special Social Security trust fund at the U.S. Treasury. But what is in the fund is Treasury IOUs for the spent revenues. When the “trust funds” are needed to pay Social Security benefits, the Treasury will have to sell more debt in order to redeem the IOUs.
Social Security was mugged again during the Clinton administration when the Boskin Commission jimmied the Consumer Price Index in order to reduce the inflation adjustments that Social Security recipients receive, thus diverting money from Social Security retirees to other uses.
We constantly hear from Wall Street gangsters and from Republicans and an occasional Democrat that Social Security and Medicare are a form of welfare that we can’t afford; an “unfunded liability.” This is a lie. Social Security is funded with an earmarked tax. People pay for Social Security and Medicare all their working lives. It is a pay-as-you-go system in which the taxes paid by those working fund those who are retired.
Currently these systems are not in deficit. The problem is that government is using earmarked revenues for other purposes. Indeed, since the 1980s Social Security revenues have been used to fund general government. Today Social Security revenues are being used to fund trillion dollar bailouts for Wall Street and to fund the Bush/Obama wars of aggression against Muslims.
Having diverted Social Security revenues to war and Wall Street, Paulson says there is no alternative but to take the promised benefits away from those who have paid for them.
Republicans have extraordinary animosity toward the poor. In an effort to talk retirees out of their support systems, Republicans frequently describe Social Security as a Ponzi scheme and “unsustainable.” They ought to know. The phony trust fund, which they set up to hide the fact that Wall Street and the Pentagon are running off with Social Security revenues, is a Ponzi scheme. Social Security itself has been with us since the 1930s and has yet to wreck our lives and budget. But it only took Hank Paulson’s derivative Ponzi scheme and its bailout a few years to inflict irreparable damage on our lives and budget.
Years ago with stagflation defeated and a rising stock market, I favored privatizing Social Security as a way of creating a funded retirement system and producing greater savings and larger incomes for retirees. At that time Wall Street was interested, not for my reasons, but in order to collect the fees from managing the funds.
Had Social Security been privatized, I doubt that Wall Street would have been permitted to deregulate the financial system. Too much would have been at stake.
After the latest crisis brought on by Wall Street’s dishonesty and greed, trusting Wall Street to manage anyone’s old age pension requires a leap of faith that no intelligent person can make.
Wall Street has got away with its raid on the public treasury. Now, pockets full, it wants to pay for the heist by curtailing Social Security and Medicare. Having deprived the working population of homes, jobs, and health care, Wall Street is now after the elderly’s old age security.
Social Security, formerly an untouchable “third rail of politics,” is now “unsustainable,” while the real unsustainables–a pre-1929 unregulated financial system and open-ended multi-trillion dollar Global War Against Terror–are the new untouchables. This transformation signals the complete capture of American democracy by an oligarchy of special interests.
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