Daily Archives: May 26, 2014

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Toxic bankers, captive regulators: Everything you think about the housing market is wrong

Toxic bankers, captive regulators: Everything you think about the housing market is wrong

We know what caused the housing crash: Reckless banks, shoddy regulation, rampant greed. Let’s lay out the truth.

The news cameras kept recording after the power failed. Complete darkness. Then a heavy red curtain was swept aside, allowing a bit of sunlight to stream into the woodpaneled hearing room. This natural illumination had a strange effect on Alan Greenspan, the day’s first witness. He was seated before the Financial Crisis Inquiry Commission (FCIC), a ten-member panel of private citizens appointed by Congress to examine the causes of the financial and economic crisis. By that day, in April 2010, the FCIC had already conducted several hearings and public meetings. Greenspan had spent much of the morning before the power outage in a defensive mode, denying that, as chairman of the Fed for nearly two decades, he had the tools to predict or prevent the subprime mortgage meltdown and the connected global financial crisis.

Yet he had admitted to the panel: “I was right 70 percent of the time, but I was wrong 30 percent of the time. And there are an awful lot of mistakes” over the years. Now, in the semidarkness, Greenspan retreated a bit. He responded to a question about whether he believed there still was excessive debt in the banking system with a nod, a gesture not captured on the official record. The commissioner who posed the question remarked that he saw Greenspan nod. An audience member said he had not nodded. Greenspan sat silently, not offering to clarify. Minutes later, the hearing adjourned and the witness departed.

That was classic Greenspan: bright moments of clarity followed by obfuscation and retreat. Eighteen months earlier in October 2008, in his most candid moment, he told a congressional subcommittee that he had found “a flaw” in his entire system of thought. He had adhered for decades to a particular view of how markets operated, only to discover several decades later he’d been very wrong. Yet the question for the panel that April morning was whether the crisis could have been avoided.

At the hearing, Greenspan explained that the origination of subprime mortgages had posed no problems between 1990 and 2002. In that early era, he said, it was a contained market, but then things changed. It was the expansive sale of adjustable rate subprime mortgages, followed by the securitization of these mortgages, and the transformation of those securities into collateralized debt obligations (CDOs) that caused problems. There was a huge demand from Europe for CDOs backed by such mortgages, thus fueling increasingly higher-risk originations. Greenspan also made it clear that without “adequate capital and liquidity,” the “system will fail to function.” He called for additional equity capital (less borrowing relative to assets held). He said he now realized that our banking system had been undercapitalized for forty to fifty years. But in 2011, when it came time to require banks to have greater equity capital, he publicly denounced “an excess of buffers” in an op-ed in the Financial Times. Seeming to forget the savings and loan (S&L) crisis of just twenty years earlier, he asked: “How much of its ongoing output should a society wish to devote to fending off once-in-50 or 100-year crises?” This was Greenspan, light and dark.

While he admitted in the abstract to being wrong 30 percent of the time, the FCIC found it impossible to pin him down on particular acts or omissions. Instead, he pointed toward many others who contributed to the problem. His view was supported by the evidence but was nevertheless incomplete. He asserted that effective markets depended on enforcement against fraud and misrepresentation. When asked by FCIC chairman Phil Angelides what the Fed had done to combat fraud, Greenspan admitted that between 2000 and 2006, it had made only two criminal referrals to the Justice Department. In contrast, in 2005, the Federal Bureau of Investigation (FBI) had 22,000 cases of mortgage fraud under investigation. Greenspan dismissed this figure, contending that out of 55 million outstanding residential mortgages, 22,000 did not indicate a systemic problem. Angelides then asked him to explain why the Fed had made only two referrals. Greenspan explained that in all other cases of concern, they had been able to achieve compliance without the need for criminal enforcement. He said, “[a] goodly part of supervision and regulation is to get things solved so that if somebody is in violation of something and you can get them to adjust so that the regulators are satisfied, it never gets to the point where it’s a referral for enforcement in some form or another.” This non-enforcement policy created an incentive for misbehavior. Cracking down both through criminal and civil enforcement is not just about compliance, but also a vital part of deterrence.

Brooksley Born, Again

One of the appointees to the FCIC was Brooksley Born, who had resigned from her position as commissioner of the Commodity Futures Trading Commission (CFTC) in 1999. It was appropriate for her to at last face Alan Greenspan, who with others in the Clinton administration had deregulated derivatives and helped create the conditions for the meltdown.

While Angelides questioned Greenspan about his record on combating fraud, perhaps on Born’s mind was a lunchtime conversation she’d had with him in 1996. She had just become chairman of the CFTC but was not new to Washington. She had been a partner at the Arnold & Porter law firm for many years and, before her appointment to lead the agency, had briefly served as a commissioner. In her new leadership role, Born was already concerned about risks associated with derivatives, a key area of the CFTC’s jurisdiction.

Over lunch, Greenspan had shared with Born his view of market fraud. As she later recalled: “He explained there wasn’t a need for a law against fraud because if a floor broker was committing fraud, the customer would figure it out and stop doing business with him.” Born challenged him on this view, contending that as an attorney, she believed that prohibitions on fraud were essential. At Arnold & Porter, for instance, she had represented clients entangled in the Hunt brothers’ conspiracy to manipulate the price of silver and defraud investors. After hearing her out, Greenspan replied: “Well, Brooksley, I guess you and I will never agree about fraud.” The exchange was so unsettling that she shared the conversation with her top aides, Michael Greenberger and Daniel Waldman, who confirmed her account of the discussion. This encounter was particularly disturbing given Greenspan’s influence, not just over the economy but over President Clinton and the other banking regulators. This conversation would not be the last or the most contentious of their encounters.

Today, she asked him this question: “In your view, did credit default swaps, which are a type of over-the-counter derivatives contract, play any role in causing or exacerbating the financial crisis?” Greenspan did not answer directly, although he knew what she was getting at. He said that to his knowledge, they had not been discussed at the President’s Working Group; they were “not on the agenda” at the time. That may have been his recollection, but the report that he signed in 1999 did include “credit swaps.” Born reminded him that in 1996, the Fed had issued supervisory guidance on them.

Next, Born asked him about his libertarian views and whether he thought the Fed was to blame for the crisis. Specifically she asked whether the Fed had

fail[ed] to carry out its mandates, . . . [in that] . . . the Fed and the banking regulators failed to prevent the housing bubble; they failed to prevent the predatory lending scandal; they failed to prevent our biggest banks and bank holding companies from engaging in activities that would bring them to the verge of collapse without massive taxpayer bailouts; they failed to recognize the systemic risk posed by an unregulated over- the- counter derivatives market; and they permitted the financial system and the economy to reach the brink of disaster.

Greenspan never answered that question. But he did deny that his “views on regulation” interfered with his performance: “I took an oath of office to support the laws of the land,” he said, and he insisted that he had enforced the laws, including those he “would not have constructed in the way they were constructed,” as “that was my job.” Born had a limited amount of time to ask her questions and Greenspan to answer. It was the next commissioner’s turn. Greenspan concluded by informing her: “So I know my time has run out, but I really fundamentally disagree with your point of view.”

After the long day, as after many others at the FCIC, it was difficult to fully understand the truth about the crisis. When a single witness can equivocate over a period of hours and then over a period of years, it is easy to think there is no there, there.

JPMorgan Lied To Fed, Did Not Report Losing Trades Whistleblower Charges

Are we not surprised by JP Morgan! Lying! When are the Feds going to quit giving this bank and this CEO a free pass!!!

Australia’s Sydney Morning Herald:

A technical support person who worked for JP Morgan in Australia claims the bank regularly misled its New York parent and the US Federal Reserve by failing to report losing trades.

The explosive allegations are contained in a submission by the person to the Senate inquiry into the performance of the Australian Securities and Investments Commission. BusinessDay has met the person and agreed to allow him to remain anonymous. He appears to be credible.

The person complained to ASIC and later went to work for the regulator, but he said the regulator failed to investigate his claims.

A spokesman for JP Morgan denied the allegations. “The claims are false and misleading,” he said.

 In his submission, published by the inquiry, the person said he was employed at the Sydney office of JP Morgan between 2004 and 2007. He worked for a team involved in the post-trade management of the bank’s OTC (over the counter) equity derivative business for the Asia-Pacific region.

In 2007, before the global financial crisis, he became increasingly concerned by “certain practices that appeared to circumvent regulatory commitments and risk management expectations,” he said.

These included:

■ Misleading reports being provided to head office and the Federal Reserve Bank of New York on the number of outstanding trades.

■ Trades not being booked into the system until they were ”in-the-money”.

■ Trades not booked into systems and only being tracked by paper-based legal agreements, which would be ”torn up” if required, thereby leaving no trace.

■ Bypassing or attempting to bypass the opinions of in-house lawyers to complete work faster, even if this resulted in incorrect legal agreements being signed by the traders and sent to other major banks as final confirmation of the terms of the trade.

The person said he sought to discuss his concerns with lower and middle management but was warned that ”front office would get rid of me if I persisted”.

”JP Morgan’s ‘Worldwide Rules of Conduct’ state: ‘The most important rule is also the most general: never sacrifice integrity, or give the impression you have, even if you think that it would help JP Morgan Chase’s business’.

”In support of this policy, I lodged a complaint with senior management fully expecting to be able to discuss all my concerns and receive guidance from the relevant departments, including legal and compliance. This did not occur and instead I immediately stopped being paid.”

He said his inquiries resulted in him being threatened that his employment would be terminated because of the complaint. The person was employed by an agency.

”I was informed that I would not be paid my outstanding salary and any future salary until I signed a new employment contract reducing my notice period from one month to one week,” he said.

”My contract was terminated shortly after for ‘economic reasons’.

”I had no contact with senior management or legal and compliance and no opportunity was provided.”

The person lodged a complaint with the Fair Work Ombudsman and said he authorised and urged the agency to contact ASIC but that it declined to pursue the matter.

The person formally reported his claims of misconduct to ASIC on November 27, 2008. He subsequently met two ASIC employees on January 5, 2009, at the regulator’s Martin Place offices.

He claimed the officers displayed little understanding of the matters raised and asked why he had made a misconduct report.

”The interviewers were surprised and somewhat incredulous by my response that I believed it was the right thing to do,” he said.

”The overall feeling that the interview conveyed was that ASIC was unprepared to accept reports of misconduct and had no skills to manage such matters. The meeting ended and, though I advised I was ready to provide further assistance, I was not contacted by ASIC. As far as I am aware ASIC never contacted the Fair Work Ombudsman.”

 

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A message from whistleblower Linda Almonte

A message from whistleblower Linda Almonte

Linda posted this comment on my blog. Be sure to check out her websites: 

https://www.lindaalmonte.com/ and https://www.consumerdebtassociation.com.

Linda Almonte
11h

Ok Linda Almonte here and I need to get a call out to people to contact me if they are victims for my latest SEC and regulator update. Well as we all know for billions in intentional fraud in the credit card division with a business strategy to intentionally abuse the judicial system to bypass state and federal consumer protection laws by using illegal actions to obtain default judgments that total in the billions so collections are easy no calls or letters needed they can then garnish wages, clean out and take all bank accounts and put liens on homes and so on. Now when they learned of the OCC investigation I launched in 2011 after proving up every allegation for years and were told a plane full of auditors were dispatched to their credit card operations center in San Antonio you may remember the front page WSJ article they fired some of the internal attorneys and dismissed some lawsuits (without prejudice meaning don’t get happy just reassigning the attorney name and be back) and everyone celebrated. Well the OCC did sent a group of auditors as we learned from the great investigative work of American Banker and inside employees trying to stay and get information out in a not too friendly environment. They were put under a cease and desist order and the auditors camped out for months leaving with truckloads of document. That whole time since 2011 when they supposedly halted all litigation on any Chase, WaMu, Providian, Circuit City, Bank One, Best Buy and so on credit cards and according to statements also went back and the 2009-2011 were dropped and people refunded too they worked on earning brownie points with the regulators camping out. They had all employees just still coming to work but no litigation no work and working with the auditors on all the things they could change to actually work and follow state and federal laws. At the same time they also claimed to have stopped debt sales and the selling of bogus customer data with incorrect balances, many accounts paid years prior but no captured in their various old dos systems and databases instead of systems for some functions. Again they promised not to resume until they could be in compliance. Last year when Jamie Dimon called up Holder and told him what his settlement would be and the terms they did pay multi-billion dollar settlement for the foreclose part of the OCC investigation and results that there was intentional fraud committed to make numbers at the expense of at least 100k people with the credit card litigation portion alone. Now that investigation they asked to roll into the the announcement but is it’s own OCC Consent Order and terms they asked for “cooperation agreement” status basically deferred prosecution but not even a monetary fine. This order is very detailed within a short time frame that had to make sure there were non of these illegally obtained judgments in any court and refund consumers from all the ones previously. Jamie Dimon personally to regulators, investors and the SEC 10K and 8K filings swore all litigation stopped in 2011 and they had not resumed and still haven’t as of now and again assured no more debt sales with bogus data and putting “as is” in the sale contract their rationale that it didn’t matter the billions in intentional fraud harming so many they found a “loophole” as Matt Taibbi describes in the book finally released “The Divide” in which my story is chapter 8. He assured regulators and investors (now tell me if I am crazy but outright lying to investors on TV, in their investor presentations and in SEC reporting should qualify as misrepresenting information to investors and lying to the SEC, all regulators, investors and customers is an SEC issue. And those customers Jamie and others seem to think are free play money and should just keep on forking money into Chase to keep their gambling money available and the only customers Jamie even talks about it and is worried about is investors are happy. . Investors were finally getting concerned with the amount of media coverage the collections, litigation and debt sales in the credit card division was getting and escalating more and more. So Jamie assured all since they had not filed any lawsuits since 2011 and got the brownie points with regulators and no charges, not even a fine just a thank you for cooperating and be good in the future but did update that OCC Consent order with some strict time frames to assure all is cleaned up and that free pass could be snatched away fast if they aren’t compliant with it. Jamie swore to all of the agencies and the SEC reporting and investors all credit card issues were done with my case now and all could move on to other items. Specifically even said with the exception of a few straggler lawsuits with the credit card back office there was no way of any further issues as they discontinued the areas where the fraud was in 2011 and not restarting anytime soon. Investors got confidence back in credit card and Jamie gave himself a 74% raise taking his income to $30 million and highlighted with all of the settlements and fines Chase numbers still returned good dividends in part thanks to the sudden increase in sale in the credit card division. Well starting last spring after being asked to speak at a consumer attorney seminar with over 60 consumer attorneys and a couple fraud examiners that they really didn’t teach banking, collection agency processes or debt buying in college which I knew but also they don’t teach most banking regulations in law school. Now that was a problem when top consumer attorneys are surprised and learned a lot in a two day session with just basic explanations of the industry and how everything works and expanding on their regulatory knowledge. Several of those attorneys spent the past year now really kicking ass against banks and debt buyers just with additional knowledge and q&a so I kept it up training consumer attorneys to fight like bankers and it is really working. The day after the OCC Consent order and settlement one of the fraud examiners from the seminar called me. I had taught them the same as I did Matt Taibbi for the book and to prove all my allegations 100% true how to walk into any court and with the free clerk computer in minutes find thousands of these accounts and the equal from BOA, AMEX, Citi, Cap ONe, every debt buyer, Ford Motor and so on from that short period in between WaMu and Chase I was on “the darkside at NCO” . Anyways turns out I can’t find a court not packed and current employees confirm they never stopped litigating only moved process to Elgin Il the old Bank One headquarters. I have millions in judgments from multiple states but can’t contact the people I find in court files and need to find some of the victims. So anyone with a judgment from Chase Credit Card please contact me and by the way I will get you lawyered up as those illegally obtained judgments may turn out to be winning lotto tickets for the victims. People need to pull their credit bureaus and look for them in tradelines and under public records and go to their local courts websites and search public records under their name. The majority of people have no idea until a good chunk of the paycheck is missing and will be missing for a duration of time and then they go to the ATM and their checking and savings accounts were cleaned out by Chase. Even the same robosigner names, a lot of internal attorneys in addition to external, same bogus manufactured proof of account and balance (a spreadsheet) no one served and so on. Right now anyone impacted holds all of the cards for a consumer suit and myself, other former employees, industry experts and fraud examiners will all attack these cases to give the people the perfect suits with every detail and law broken regulation violated spelled out in detail and statistical work up of hefty damages for that consumer while regulators get all the information and figure out what to do with this one. Any of you who read Matt Taibbi’s book and my part on this staying in line with Matt’s over and over again question of how is it no one went to jail and regulators saying bank cases are so complex we will even prepare everything needed to some criminal prosecutions gift wrapped and ready for a grand jury and see if we can get any takers. BTW the executives in Credit Card who admitting did this on purpose and not only fired but wiped out anyone that questioned anything or wouldn’t sign off or be apart of billions of dollars in fraud of course are still there and your accounts and data in their hands even the AVP shredder who shredded all customer and attorney correspondence, scra military notices, bankruptcy notices, stop payments ad the list goes on for a full 18 months. I mean there was no value in processing those items it didn’t bring in dollars per hour or day for the department so what if they were suing guys deployed in Iraq and Afghanistan and claiming they were served so they come back to or the spouses have all their accounts wiped out. And consumers paying attorneys and no matter what they did it not slowing anything let alone stopping easy they were shredding it same with all the other stuff. She is among the group all promoted, raises and ruling with even more confidence than ever and they remind all at least weekly say a word and follow in my footsteps and get wiped out. Well as those people leave or find other jobs or early retirement you will notice more sources in the articles and although former employees received very serious calls from Chase when the AG investigations started telling them to call their attorneys immediately if contacted by any AG or regulator that “Chase would provide them with the legal resources they would need in these investigations” making it sound like they former employees were under some criminal investigation and needed Chase attorneys to protect them. In reality it was intentional obstruction of justice and they wanted to get them under retained so that their handpicked and scripted attorneys spoke for the employees. Well several eventually told them where to go and asked which AG’s and regulators they were worried about so they could ask for subpeonas. Again anyone with a Chase, WaMu or Providian judgment against them if you owed money or not or already paid contact me via one of my websiteshttp://www.consumerdebtassociation.com or lindaalmonte,com there is a team here that wants to give you every resource imaginable to make Chase pay you for their intentional fraud against you and will work to get you max min damages the only way to really stop them or the rest of the industry also a train-wreck is to put the screws to the high profit margins.. Currently only 1% of consumers get an attorney and file anything for these billions of dollars in intentional fraud, usually it is hard to get a consumer attorney experienced in this, they don’t have any money because their wages are garnished and so on. They actually plan out x million dollars a year in “cost of doing business lawsuits” as they call them It is such a tiny hit compared to the billions even if they total in the millions it is a joke. Well this motivated team can uncover every little violation, damages you received past present and future you may not realize and go for high punitive damages to stop the abuse of courts for intentional fraud. I am in Florida now but will be back and forth from Florida and California the next couple of month. Remember California also has an AG lawsuit against Chase for this and recently won the motion to dismiss against their 8 month fight and so any residents of California would be great and there is a LA team ready to go. So spread the word everyone pull credit bureaus and check court records looking for any judgments from banks, creditors or debt buyers especially Chase because of the intentional violations and lying to regulators and the world but with all of the orders out now really from anyone you have a good hands down case. And remember they rolled out a lot of tighter laws and regulations and you do have options and recourse even if you do owe the debt filing falsified evidence in court and not serving people makes that judgment illegally obtained in every way. Just think what would happen if in criminal cases it got our a police department was manufacturing evidence to guarantee and outcome and denying the person the right to an attorney or even to know about the trial and show up. It is really the same abuses of the judicial system in either situation. And as now every regulatory agency has confirmed over and over robosigning is illegal in any situation and by the way debt buyers all affidavits are robosigned there is no one with personal knowledge or access to it they are not allowed to file affidavits and can’t get them. And robo-calls are illegal and you can get an instant $500 to $1500 per call. The details are on my website but lets start knocking out that profitability at millions of peoples expense.
Linda Almonte