Daily Archives: July 19, 2014

DOJ Memo Leaves No Doubt About Operation Choke Point’s Motives

Interesting nugget that I found in American Banker, concerning a DOJ memo dated September 9, 2013 about Operation Choke Point:


To: Stuart F. Delery

Assistant Attorney General

Civil Division

Through:  Maame Ewusi-Mensah Frimpong

Deputy Assistant Attorney General

Civil Division

September 9, 2013

FROM: Michael S. Blume°


Consumer Protection Branch

SUBJECT: Operation Choke Point: Six-Month Status Report

  • We principally are pursuing civil, rather than criminal, investigations. Criminal investigations can take considerably longer to complete and generally require a more intensive investigation. Only if an investigation presents particularly egregious criminal conduct are we opening it as a criminal investigation.
  • We are targeting banks more than payment processors, and payment processors more than merchants. Any one case, whether against a bank, a processor, or a merchant, takes substantial time and attention from our team. Bank cases will deter other banks, thereby stopping the processing of transactions for fraudulent merchants and the processors with which they work. This may mean filing civil complaints or criminal cases against banks based on transactions with fraudulent merchants and/or processors – but not filing actions against the underlying fraudulent merchants or processors. This practice is not optimal and may present litigation risks. But it may be necessary to prevent the initiative from grinding to a halt due to resources used pursuing the merchants and processors.


The financial institutions we are investigating have not suffered any actual losses, but such actual losses are not necessary under [the Financial Institutions Reform, Recovery and Enforcement Act].  There is only one case interpreting the phrase “affecting a financial institution” in the context of FIRREA, and that case supports our theory.


Although we recognize the possibility that banks may have therefore decided to stop doing business with legitimate lenders, we do not believe that such decisions should alter our investigative plans.  Solving that problem – if it exists – should be left to the legitimate lenders themselves who can, through their own dealings with banks, present sufficient information to the banks to convince them that their business model and lending operations are wholly legitimate.

Big four British banks could facing break-up threat

BRITAIN’S competition watchdog said it would not rule out ordering a break-up of the “big four” banks as it set out plans for a full-scale inquiry which could result in a radical shake-up of the sector.

The Competition and Markets Authority (CMA) found measures so far to open up the market, dominated by Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland, had not been effective enough.

It said key parts of UK banking lacked effective competition and failed to meet the needs of personal consumers or small and mediumsized enterprises (SMEs).

The CMA announced a consultation over its provisional decision to launch a full-scale 18-month inquiry which could result in a series of reforms.

These range from enhancing information provided to customers to banning complex fees, capping overdraft charges and forcing banks to allow smaller rivals to use their branch networks or payment systems.

The CMA said going further and imposing so-called structural remedies such as forcing the break-up of banks could be expensive.

It cited the Pounds 1.4bn cost to taxpayer-backed Lloyds Banking Groupfor hiving off hundreds of branches under the TSB brand under European rules on state aid.

Read on.

Andrew Cuomo birthed the current mortgage crisis and the market crash of 2008

No wonder Cuomo wants Propublica’s article to go away and distract the readers:

In emailed statements and a series of tweets as we were reporting this story, Glaser criticized ProPublica and it founding chairman and largest funder, Herbert Sandler.

Last month, Glaser said in an email:


Ironically, Herb Sandler, the founder of ProPublica, was a pioneer in the exotic lending business, although the controls he put in place as a portfolio lender were discarded by other players as these products morphed their way into the secondary/investor market; nonetheless ProPublica is built on the fruits of the exotic mortgage market through the fortune Herb made at Golden West and World Savings


This month, he emailed:


In 2006, when propublica’s billionaire subprime founder was denying any problems in the mortgage industry, and continuing to flood the mortgage market with abusive loans, I was warning of the devastating impacts of these toxic loan products and calling for stricter regulation. As Attorney General, Andrew Cuomo held financial institutions accountable, returned billions to investors, and forced lenders to adopt sweeping reforms. Propublica was built on the backs of subprime mortgage victims – while the Attorney General and I worked on ending the kind of abusive lending that Propublica continues to benefit from today. I’m happy to compare that record anytime.


Asked to respond to Glaser’s comments, Sandler noted that he has no information on the story: “It’s an absolute policy at ProPublica that directors and funders do not have any information about any story on which journalists are working.”

Glaser’s statements are “a transparent attempt to deflect attention from the story on him. I have no relevancy to it,” Sandler said. “If anybody is interested in any of the background on this, there is a website goldenwestworld.com that speaks to some of the things he’s talking about.”

Well, what the media doesn’t resurface into the news is Cuomo’s part in the mortgage crisis that we have today. As then secretary of HUD from 1997-2001, Andrew Cuomo was behind programs that destabilized Freddie Mac and Fannie Mae and gave birth to the mortgage crisis and market crash of 2008. In a HUD News Release No. 99-131 in 1999, “Cuomo announced a policy to require the nation’s two largest housing finance companies to buy $2.4 trillion in mortgages over the next 10 years to provide affordable housing for about 28.1 million low- and moderate-income families. Cuomo said the historic action by HUD raises the required percentage of mortgage loans for low- and moderate-income families that finance companies Fannie Mae and Freddie Mac must buy from the current 42 percent of their total purchases to a new high of 50 percent – a 19 percent increase – in the year 2001. The percentage will first increase to 48 percent in 2000.”

Cuomo’s programs forced banks to loan to low-income and bad-credit customers that eventually led to today’s housing collapse. In a YouTube video in a press conference in 1998, Cuomo defended the Clinton administration’s bank affirmative-action plan and admitted that there would be more defaults due to the higher risks associated with the(mandated) loans: 

This action will transform the lives of millions of families across our countryby giving them new opportunities to buy homes or move into apartments with rents they can afford. It will strengthen our economy and create jobs by stimulating more home construction, it will help ease the terrible shortage of affordable housing plaguing far too many communities, and it will help reduce the huge homeownership gap dividing whites from minorities and suburbs from cities.”—Andrew Cuomo, Housing and Urban Development Secretary 


Barclays, Deutsche Bank Face U.S. Senate Hearing

Mark your calendars for July 22…

Barclays Plc (BARC) and Deutsche Bank AG (DBK) face scrutiny over their sale of products to a hedge-fund firm that allowed it to skirt borrowing limits and avoid taxes, according to people with knowledge of the matter.

The U.S. Senate Permanent Subcommittee on Investigations plans a hearing next week on what it calls abusive transactions by financial institutions, according to a notice from the panel. The companies, which aren’t named in the notice, are Barclays, Deutsche Bank and hedge-fund manager Renaissance Technologies LLC, the people said. Representatives for each of the firms plan to testify at the July 22 hearing, the people said.

The investigation is another blow for Antony Jenkins, chief executive officer of London-based Barclays, as he seeks to restore the firm’s reputation after it became the first lender to be fined for rigging Libor. For Deutsche Bank, the hearing comes less than four years after the Frankfurt-based lender paid $554 million to avoid unrelated U.S. criminal charges involving the sale of tax shelters.

Kerrie Cohen, a spokeswoman for Barclays, declined to comment, as did Renee Calabro of Deutsche Bank; Jonathan Gasthalter, who represents Renaissance; and Gordon Trowbridge, a Senate subcommittee spokesman. The people with knowledge of the matter spoke on condition of anonymity because they weren’t supposed to reveal information before the hearing.

Read on.

ONGOING COVERAGE: Protest in Morgan Junction as veteran, family evicted by deputies – then go back inside

(SCROLL DOWN FOR THE LATEST: Evicted couple back inside as of late afternoon)

9:26 AM: Numerous texts are coming in asking about what sounds like a protest somewhere in Morgan Junction. It’s an eviction protest at a Morgan/lower Gatewood home where local activists are hoping to stop sheriff’s deputies from forcing a disabled veteran, his wife, and children to leave. Public records indicate their house had been sold to a developer in April after being foreclosed on. The advocacy group had advised us and other news media of a 10 am protest and 10:30 am news conference today; apparently it has started early, and we’re on the way over. Updates to come.

9:56 AM: Our crew at the scene says deputies are there evicting the family from the house in the 6500 block of 41st SW. An ambulance is there, apparently to transport 63-year-oldByron Barton, but protesters are trying to stop the ambulance from moving – including by lying under it:

We’re adding Instagram video clips (the service limits to :15 but is the fastest way to get video out) as well as photos. The eviction action was postponed from last month, according to citywide-media reports including this one from KING.

10:05 AM: Our crew reports that sheriffs say everyone in the house is out.

Jean Barton made a brief statement that her husband does not want to go to the VA hospital but has nowhere else to go.

10:26 AM: So has City Councilmember Kshama Sawant.

The original announcement received yesterday had said she would participate in the 10:30 am briefing, which the group SAFE (Standing Against Foreclosure and Eviction) has said they still expect to hold.

11:05 AM: No briefing after all – Byron Barton was removed from the ambulance, and it has left, our crew at the scene reports. The family remains out of the house and there’s no word yet where they will go. A commenter asked if any help was needed; Jean Barton says Byron’s clothes are all in the house so that’s the kind of thing they need – she can be reached directly at 206-355-8300. She works, by the way, at Mary’s Place – an agency that helps homeless women. We’ve been looking into court files; the Bartons filed a lawsuit in May alleging various improprieties in the foreclosure process, which documents indicate has been ongoing since at least 2012. Trustee Quality Loan Service is listed as the firm that sold the house toTriangle Property Development LLC in April.

Read on.

Call for SEC probe by pension adviser into Walgreen’s meetings on moving offshore to escape U.S. taxes

A pension adviser has asked the Securities and Exchange Commission to investigate private meetings that top Walgreen execs held with investors who prodded the drugstore chain to reincorporate overseas for tax reasons.

CTW Investment Group, which advises union pension funds worth $250 billion, is raising questions about whether Walgreen’s meetings with investors Goldman Sachs, Jana Partners, Och-Ziff and Corvex ran afoul of fair disclosure rules.

“Walgreen may have put the vast majority of its investors at a disadvantage while positioning influential hedge funds to profit from material, non-public information,” said CTW’s Michael Pryce-Jones.

When news surfaced that Walgreen had held private talks with hedge funds in February and April, the retailer’s shares rose.

Walgreen is weighing a plan to redomicile in a lightly taxed country overseas such as Switzerland as part of its planned merger with British drugstore giant AllianceBoots.

Read on.

FX probe could be bigger problem than Libor: RBS chief

(Reuters) – An investigation into alleged manipulation of foreign exchange markets could pose a bigger problem for banks than the Libor interest rate rigging scandal, the boss of Royal Bank of Scotland (RBS.L) said on Friday.

RBS paid $612 million last year to settle allegations that it manipulated Libor rates, one of several banks hit with big fines for rigging financial benchmarks. Regulators are now investigating allegations that traders manipulated key reference rates in the $5 trillion-a-day foreign exchange market.

Read on.