Daily Archives: April 30, 2014


Bill Black: GAO and Wall Street Journal Whitewash Huge Criminal Bank Frauds

Bill Black: GAO and Wall Street Journal Whitewash Huge Criminal Bank Frauds

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Originally published at New Economic Perspectives

Every day brings multiple new scandals. At least they used to be scandals. Now they’re simply news items strained of ethical content by business journalists who see no evil, hear no evil, and speak not about evil. The Wall Street Journal, our principal U.S. financial journal ran two such stories today.

The first story deals with tax evasion, and begins with this cheery (and tellingly inaccurate) headline: “U.S. Banks to Help Authorities With Tax Evasion Probe.” Here’s an alternative headline, drawn from the facts of the article: “Senior Officers of Goldman Sachs and Morgan Stanley Aided and Abetted Tax Fraud by Wealthiest Americans, Failed to Make Required Criminal Referrals, and Demanded Immunity from Prosecution for Themselves and the Banks before Complying with the U.S. Subpoenas: U.S. Department of Justice Caves in to Banker’s Demands Continuing its Practice of Effectively Immunizing Fraud by Most Financial Elites.”

Oh, and the feckless DOJ (again) did not require any officer who committed the felony of aiding and abetting tax fraud to resign or to repay the bonuses he “earned” through his crimes. But not to worry, the banks – not the bankers – may have to pay fines as the cost of doing their felonious business. The feckless regulators did not even require Goldman Sachs and Morgan Stanley to disclose to shareholders their participation in the program.

Best of all, the “cooperation” the banks will offer will be of vastly reduced value because under Swiss law they will not report the names or any identifying information of the wealthy U.S. taxpayers that they helped commit felonies. But not to worry says DOJ:

“Through the program, as well as through ongoing investigations and other law enforcement tools, we are confident that we will obtain information that will lead us to account holders who have thought for too long that they can keep hiding,” said Dena Iverson, a Justice Department spokeswoman.

And did I mention that there was an U.S. amnesty program for wealthy U.S. tax cheats who used Swiss banks to commit their felonies?

Note that this aspect of Switzerland’s deliberate national policy of aiding tax evasion by the world’s wealthiest tax cheats fits into the article I wrote earlier this week about Dr. Hans Geiger’s rage that FATF is seeking to require banks to make criminal referrals against tax cheats. Geiger is a leader in a Swiss movement to block that requirement. He has also written that requirements that the banks file criminal referrals when they discover evidence indicating that they may have aided money laundering, the funding of terrorists, or international sanctions busting should be eliminated.


Fannie Mae and Freddie Mac Would Need New Bailout in Downturn, FHFA Says

Fannie Mae and Freddie Mac Would Need New Bailout in Downturn, FHFA Says

Fannie Mae and Freddie Mac (FMCC) could require an additional bailout of as much as $190 billion in a severe economic downturn, according to the results of stress tests released by the regulator for the U.S.-owned companies.

The two mortgage-finance giants, which have already taken $187.5 billion in taxpayer aid since 2008, would need more funds to stay afloat if home prices plummeted in a severe downturn, theFederal Housing Finance Agency said in a report today. The stress tests, mandated by the Dodd-Frank Act, use the same assumptions that the Federal Reserve does in gauging the ability of the nation’s largest banks to withstand a recession.

The results reflect the terms of the companies’ bailout, which require them to send to the Treasury all of their quarterly profits above a minimum net worth threshold. That money, counted as a return on the U.S. investment, prevents them from rebuilding capital or paying down debt to taxpayers.

“These results of the severely adverse scenario are not surprising given the company’s limited capital,” Fannie Mae (FNMA) Senior Vice President Kelli Parsons said in a statement. “Under the terms of the senior preferred stock purchase agreement, Fannie Mae is not permitted to retain capital to withstand a sudden, unexpected economic shock of the magnitude required by the stress test.”


OCC Report Highlights Status of Independent Foreclosure Review Payment Agreement

OCC Report Highlights Status of Independent Foreclosure Review Payment Agreement

NR 2014-65
Contact: Bryan Hubbard
(202) 649-6870

WASHINGTON —  The Office of the Comptroller of the Currency (OCC) today released a status report on Independent Foreclosure Review (IFR) Payment Agreements that required the large mortgage servicers to provide $3.9 billion in payments to 4.4 million eligible borrowers and $6.1 billion in other loss mitigation and foreclosure prevention assistance.

Because servicers entered agreements at different times, regulators directed the creation of four separate settlement funds.  The OCC report focuses on Qualified Settlement Fund 1, which includes payments from Aurora, Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust (regulated by the Federal Reserve Board), U.S. Bank, and Wells Fargo.  As of January 24, 2014, Qualified Settlement Fund 1 had disbursed 3,948,415 checks, totaling $3,385,814,432.  Of those checks, 3,280,458 (83 percent), totaling $2,903,932,623 (86 percent), have been cashed or deposited as of April 8, 2014.

The OCC also regulates EverBank, which entered a similar payment agreement in August 2013.  Payments to eligible borrowers serviced by EverBank will begin in the second quarter of 2014 (Qualified Settlement Fund 4).

The Federal Reserve Board regulates Goldman Sachs and Morgan Stanley (Qualified Settlement Fund 2), and GMAC Mortgage (Qualified Settlement Fund 3).

In addition to direct payments to eligible borrowers, the amended consent orders obligated covered servicers to provide $6,061,000,000 in other foreclosure prevention assistance.  Aurora, EverBank, GMAC Mortgage, MetLife Bank, Morgan Stanley, and PNC Bank met their obligations by paying collectively an additional $92 million to the qualified settlement funds or to U.S. Department of Housing and Urban Development (HUD)-approved nonprofit organizations providing borrower counseling or education services.  Of this amount, $63 million went to the qualified settlement funds and $29 million went to HUD-approved borrower counseling and education.  Bank of America, Citibank, HSBC, JPMorgan Chase, Sovereign, U.S. Bank, and Wells Fargo submitted foreclosure prevention assistance activities for credit under the amended consent orders on 16,362 mortgages with a total unpaid balance of $4,045,726,584 through January 24, 2014.  Data presented here reflect the servicers’ submissions, but regulators have not validated submissions nor have they awarded credit toward the obligations under the amended consent orders.

In general, independent consultant findings regarding the reviews that were completed or had a significant portion of the work finished at the termination of the IFR were consistent with the deficiencies and weaknesses examiners identified during the 2010 horizontal review of large and midsized mortgage servicers.  Besides those deficiencies and weaknesses, the findings identified additional loss mitigation related errors. Errors and process weaknesses identified most often by the consultants during the IFR included:

  • Improper loan modification denials and untimely execution, aggravated by rapidly increasing modification request volume without adequate staffing and changing program guidelines during 2009 and 2010;
  • Untimely communication and inadequate recognition of bankruptcy protection by servicing departments;
  • Violations of Servicemembers Civil Relief Act (SCRA)  protections; and
  • Fee errors arising from servicer process weaknesses, especially servicers’ lack of oversight of external parties who provided services such as legal representation and property management.

All servicers covered by the consent orders continue to take action to correct deficiencies in mortgage servicing and foreclosure processes as directed by the OCC and FRB enforcement actions.  While servicers report that much of that work is complete, federal examiners are in the process of verifying and testing that work.  This report does not discuss the status of corrective actions required by the original consent orders.

Related Link

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Every DOJ Watchdog Ever Wants To End The Special Treatment Of Prosecutorial Misconduct

Every DOJ Watchdog Ever Wants To End The Special Treatment Of Prosecutorial Misconduct

WASHINGTON — Every single Justice Department inspector general who has led the office since it was created a quarter century ago agreed Tuesday that misconduct allegations against federal prosecutors should be handled by the department’s top watchdog and not by a separate internal unit that operates under the attorney general.

Unlike those in other major federal agencies, the Justice Department’s Office of the Inspector General isn’t allowed to investigate alleged misconduct by a massive chunk of the department’s employees. Instead, inquiries into the conduct of Justice Department lawyers in Washington and assistant U.S. attorneys across the country are handled by the Office of Professional Responsibility, an entity that has long been criticized for its lack of transparency.

Federal judges have railed against OPR, which one former federal prosecutor called a “roach motel” because cases “check in, but they don’t check out.” Even the man who helped create the office and ran it for 22 years said before his death in 2007 that he believed it should be abolished and its duties handed over to OIG.

An independent investigation by the nonprofit Project on Government Oversight found 650 infractions by Justice Department attorneys — more than 400 of them categorized as reckless or intentional — from fiscal years 2002 through 2013. The department itself does not disclose the names of lawyers investigated or the details of the cases.

“The Department of Justice OIG should be like every other OIG that has full jurisdiction throughout their agency,” said Glenn Fine, who served as the Justice Department’s inspector general from 2000 until 2011, at an event marking the 25th anniversary of the office on Tuesday. “We have the capacity to perform the work and the ability to learn it.”

Former Inspector General Michael Bromwich, who served from 1994 until 1999, noted that he was recruited to the position on the premise that OPR’s functions would be folded into the Inspector General’s office, but that the plan was scrapped after opposition from Republican members of the Senate Judiciary Committee.

Donald Sterling bought newspaper ad to thank himself for donation to UCLA, UCLA returned Sterling’s $3 million research gift

Glad UCLA (my alma mater) did the right thing. 

Money may buy a lot of things, but it won’t buy off UCLA in one case.

UCLA announced Tuesday that it has returned a $425,000 payment made by Donald Sterling to support basic kidney research by the UCLA Division of Nephrology and that it will reject the remainder of the Clippers owner’s $3 million pledge.

Mr. Sterling’s divisive and hurtful comments demonstrate that he does not share UCLA’s core values as a public university that fosters diversity, inclusion and respect. For those reasons, UCLA has decided to return Mr. Sterling’s initial payment of $425,000 and reject the remainder of a $3 million pledge he recently made to support basic kidney research by the UCLA Division of Nephrology. UCLA has received numerous inquiries about an advertisement in Sunday’s Los Angeles Times falsely suggesting that it was UCLA publicly thanking him for the gift. The ad was placed by Mr. Sterling, not the university.

The real gem of this story comes in the last two sentences of that statement. Sterling bought an ad in the LA Times to ensure everyone knew about his donation, and he designed it to make it look like UCLA was thanking him for it.

Read on.


U.S. Close To Bringing Criminal Charges Against 2 Big Banks

U.S. Close To Bringing Criminal Charges Against 2 Big Banks

I’ll believe it when I see it… Will see if the toothless government finally get teeth.

Federal prosecutors are nearing criminal charges against some of the world’s biggest banks, according to lawyers briefed on the matter, a development that could produce the first guilty plea from a major bank in more than two decades.

In doing so, prosecutors are confronting the popular belief that Wall Street institutions have grown so important to the economy that they cannot be charged. A lack of criminal prosecutions of banks and their leaders fueled a public outcry over the perception that Wall Street giants are “too big to jail.”



Barclays : to announce ‘bad bank’ next week – source

Barclays : to announce ‘bad bank’ next week – source

Last year, Barclays Chief Executive Antony Jenkins announced a portfolio of assets termed Exit Quadrant, that it aimed to get rid of; and these assets are likely to go in the non-core portfolio along with commodities assets following last week’s decision by the bank to exit that business, the Financial Times said.

The source said the details had not been finalized and asked not to be named before the plan is announced on May 8.

There are 54 billion pounds of assets in the Exit Quadrant portfolio.

The Financial Times, which first reported the plan to set up a so-called bad bank of assets, said it is also likely to house parts of Barclays’ macro products unit, which includes the trading of interest rate-linked products, currencies and commodities, and some or all of Barclays’ retail banking businesses in France, Italy, Spain and Portugal.

Barclays declined to comment.By Steve Slater and Richa Naidu


FHFA Announces $110 Million Settlement with First Horizon National Corporation

FHFA Announces $110 Million Settlement with First Horizon National Corporation

FOR IMMEDIATE RELEASE 4/29/2014 Washington, DC — The Federal Housing Finance Agency (FHFA), as conservator of Fannie Mae and Freddie Mac, today announced a settlement for $110 million with First Horizon National Corporation, related companies and specifically named individuals. The settlement resolves claims in the lawsuit FHFA v. First Horizon National Corporation, et al. (S.D.N.Y.), alleging violations of federal and District of Columbia securities laws in connection with private-label mortgage-backed securities purchased by Fannie Mae and Freddie Mac during 2005-2007. Pursuant to the agreement, First Horizon will pay $61.6 million to Fannie Mae and $48.4 million to Freddie Mac. This is the 14th settlement related to the 18 PLS lawsuits FHFA filed in 2011. FHFA remains committed to satisfactory resolution of the remaining actions. Attachments: Download First Horizon Settlement Agreement 729.79 KB ### ?The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.6 trillion in funding for the U.S. mortgage markets and financial institutions. Contacts: ??Stefanie Johnson (202) 649-3030 / Corinne Russell (202) 649-3032