Monthly Archives: August 2017

Trump’s decision to pardon Joe Arpaio could be a crucial piece of evidence in the Russia investigation

Yahoo Finance:

Arpaio, an early and enthusiastic Trump surrogate, was convicted of criminal contempt in July for violating a court order to stop racially profiling Latinos.

When Trump allegedly asked Sessions this past spring whether it would be possible to drop the federal criminal investigation into Arpaio, Sessions told Trump such a move would be inappropriate, but that Trump could pardon Arpaio if he was convicted, The Post reported, citing three people familiar with the conversation.

Trump ultimately granted the pardon on Friday evening, sparking fierce backlash from liberals and some conservatives.

But some legal analysts also pointed out that Trump’s decision to pardon Arpaio, and the actions he took preceding that, may serve as an important piece of evidence to special counsel Robert Mueller, who is reportedly investigating the president for obstruction of justice.

Specifically, Trump’s decision to pardon Arpaio is key to determining his intent when he had the February conversation with Comey about dropping the Russia investigation before ultimately firing Comey after he refused to do so, said Renato Mariotti, a former federal prosecutor.

According to Comey’s testimony before the Senate Intelligence Committee in June, Trump privately told Comey, who was spearheading the FBI’s Russia probe at the time, he “hoped” Comey would “let this go,” referring to the investigation.

Several Trump allies and Republican lawmakers have since grasped those words and said they do not prove Trump tried to obstruct justice by asking Comey to drop the investigation and subsequently firing him.

Sen. Jim Risch of Idaho, for instance, zeroed in on the statement during Comey’s testimony.

After reading out Comey’s recollection of Trump’s statement, Risch said to Comey, “He did not direct you to let it go.”

“Not in his words, no,” Comey replied.

“He did not order you to let it go,” Risch said.

He later asked Comey: “Do you know of any case where a person has been charged for obstruction of justice or, for that matter, any other criminal offense, where this — they said, or thought, they hoped for an outcome?”

When Comey said that despite Trump’s words, he took it as a direction from the president of the United States, Risch said, “You may have taken it as a direction, but that’s not what he said.”

The main thing Mueller — who was put in charge of the Russia investigation after Trump fired Comey — would need to prove in an obstruction of justice case is whether Trump acted with corrupt, or unlawful, intent when he asked the FBI director to drop the Flynn investigation.

Wells Fargo wants court to toss overdraft lawsuits and let it use arbitration

A group of Wells Fargo & Co. customers who say they were victims of unfair overdraft practices want their claims heard in court, but the bank wants the disputes handled through arbitration.

Class-action lawsuits filed around the country have accused Wells Fargo of changing the order of debit card transactions — from highest dollar amount to lowest dollar amount — to unfairly increase the number of transactions eligible for overdraft penalties.

Read on.

Deregulating banks is a very bad idea, Fed chair says

Not so fast.

That was the message Friday from Federal Reserve Chair Janet Yellen, who warned about rolling back post-financial crisis banking reforms. Her remarks, delivered at a conference for central bankers and other business bigwigs in Jackson Hole, Wyo., flew in the face of the Trump White House’s stated intention to restore a more freewheeling approach to Wall Street oversight.

“A decade has passed since the beginnings of a global financial crisis that resulted in the most severe financial panic and largest contraction in economic activity in the United States since the Great Depression,” Yellen said. “Already, for some, memories of this experience may be fading–memories of just how costly the financial crisis was and of why certain steps were taken in response.”

She later added: “The evidence shows that reforms since the crisis have made the financial system substantially safer.”

Read on.

Damning report finds state agencies wasted millions meant for struggling homeowners

A damning new report from a federal watchdog shows that 19 state housing finance agencies wasted millions of dollars that should have gone to struggling homeowners as part of the government’s Hardest Hit Fund program.

The report, published Friday by the Office of the Special Inspector General for the Troubled Asset Relief Program, showed that SIGTARP’s investigation found that the all 19 of the state housing finance agencies that participated in the Hardest Hit Fund collectively wasted $3 million on items like barbecues, steak and seafood dinners, gift cards, flowers, gym memberships, employee bonuses, litigation, celebrations, and cars, instead of using the money to help struggling borrowers.

Read on.

Wells Fargo may have just made another boneheaded decision


How long is this knucklehead going to be CEO?

Wells Fargo Chief Executive Tim Sloan has reassured customers he’s doing everything he can to make up for past wrongs — except, apparently, if they got hit with excessive overdraft fees.

Lawyers for the embattled bank will appear before an Atlanta federal appeals court on Thursday to argue that more than a million customers possibly dinged by excessive overdraft charges shouldn’t be allowed to join a 9-year-old class-action lawsuit.

Read on.

KPMG became aware, as early as 2013, of “instances of unethical and illegal conduct by Wells Fargo employees.”

As calls for the replacement of Wells Fargo’s board mount, experts say attention — and blame — for a continuing pattern of misbehavior should also be focused on the company’s external auditor, KPMG LLP.

The record of management failures at Wells WFC, -0.23% started with revelations last year that millions of accounts had been opened illicitly. It got longer after the admission last month that the bank had also forced unneeded auto insurance on customers and neglected to refund optional guaranteed asset protection, so-called GAP, coverage for auto loan borrowers.

Politicians and regulators see the misbehavior as a pattern that should have been caught — and stopped. And there have been consequences for the bank. One CEO was forced to step down and forfeit millions of dollars in incentive compensation. Thousands of workers, including several executives, have been fired. Most recently the bank reshuffled its board, replacing its chairman and adjusting board committee memberships including on its audit and examination committee.

But external auditors should serve as another line of defense. Each year, auditors offer an opinion on whether their clients’ financial statements are truthful. To do so, the auditors have to determine whether they have enough confidence in the company’s internal controls to offer that blessing.


“There’s been far too little attention since the crisis on how the external auditors should be looking out for the public,” Andy Green, managing director of economic policy for the Center for American Progress, told MarketWatch.

Read on.

Dallas firm Baron & Budd files class again against Wells Fargo over auto insurance charges

SAN FRANCISCO – A new federal lawsuit filed in a San Francisco federal court by a Dallas law firm is accusing troubled bank Wells Fargo of racketeering violations and fraud in relation to auto loans.

The bank is apologizing after admitting that it charged its borrowers for auto insurance they did not ask for or need, causing many delinquencies, and in some cases car repossessions.

Dallas law firm Baron & Budd filed the lawsuit accusing Wells Fargo of violating California’s Unfair Competition Law and Indiana’s Deceptive Consumer Sales Act.

Read on.

Bank of America to Pay $6 Million to Bankrupt Couple Evicted From Home

And I remember reading this story…

Bank of America Corp. has agreed to pay more than $6 million to a California couple whom a federal judge said had been harassed and illegally foreclosed upon by the bank’s mortgage unit, ending an eight-year-long dispute.

The proposed settlement between the bank and Erik and Renee Sundquist would enable them “to end a long personal and legal nightmare that has impacted every facet of their and their sons’ lives,” according to court papers the couple filed to request that their 2014 lawsuit against the bank be dropped.

The deal calls for Bank of America to pay a fraction of the fine of more than $46 million ordered by Judge Christopher Klein in March. In his ruling, the judge said the bank’s mortgage modification process and mistaken foreclosure on the Sundquists’ home in Lincoln, Calif., left them in “a state of battle-fatigued demoralization.”

The exact amount that the bank will pay the Sundquists is confidential, according to documents filed Tuesday in U.S. Bankruptcy Court in Sacramento. The earlier order called for the bank to pay the couple nearly $6.1 million in damages.

Read on.

SEC drops case against ex-JPMorgan traders over ‘London Whale’

  • The SEC dropped its civil lawsuit against two former JPMorgan Chase traders on Friday.
  • The traders were accused of trying to hide some of the bank’s $6.2 billion of losses tied to the 2012 “London Whale” scandal.
  • The decision came four weeks after the U.S. Department of Justice abandoned its criminal case against both men.

The top U.S. securities regulator on Friday dropped its civil lawsuit accusing two former JPMorgan Chase traders of trying to hide some of the bank’s $6.2 billion of losses tied to the 2012 “London Whale” scandal.

The decision by the U.S. Securities and Exchange Commission to dismiss charges against Javier Martin-Artajo and Julien Grout came four weeks after the U.S. Department of Justice abandoned its criminal case against both men, who have denied wrongdoing.

Prosecutors said their case ran into trouble after testimony from Bruno Iksil, a cooperating witness who had been dubbed the London Whale, proved unreliable.

Iksil has publicly shifted blame for the losses toward upper JPMorgan management, including Chief Executive Officer Jamie Dimon, who at first called the matter a “tempest in a teapot.”

Read on.

Eliot Spitzer: The U.S. Never Had the Will and the Ability to Hold the Most Powerful to Account


We will publish this interview in two parts (update: read the second part here), with the first part focusing on financial regulation and regulatory capture.

Guy Rolnik: The last time we sat down for an interview was in 2011, right after the Occupy Wall Street protests began and the growing discontent of many Americans with the financial system came into prominence. What has changed since then?

Eliot Spitzer: Wall Street is different today than it was either in 2008 or 1998. It’s more concentrated in terms of the too big to fail banks. Now, one can have a conversation [on whether] that issue has been confronted with Dodd-Frank or not.

There’s greater concentration, but I also think there has been some positive movement in terms of capital requirements and de-risking their portfolios, because some of the most toxic derivatives and lending practices have been eliminated.

There’s also a reality, which is that the next crisis is never quite like the last one, and so while we may have dealt with derivatives, and we may have dealt with certain elements of subprime lending, what’s going to blow up next is something we’re not thinking about right now.

GR: I’m reading Jesse Eisinger’s book, The Chickenshit Club. Eisinger, who was a guest here at the Stigler Center last year, argues that in the last 15 years or so the U.S. has “lost the will and the ability” to pursue white collar criminal investigations and indictments when it comes to the CEOs of large firms. Do you share this view?

ES: I’m not sure we lost it, because I don’t think we ever had it.

GR: And if I had asked you that 15 years ago, when you were New York’s Attorney General?

ES: I don’t want to sit down and toot my own horn and say that we did some useful and important stuff, but I think that, by and large, there has been a failure. The S&L crisis might be the exception. There has been a failure to rigorously oppose the obligations of ethical banking throughout the system on a regular basis.

That continues to be the case, because it is difficult. Look at the continuing scandals that are pouring out of Wells Fargo, with the most recent headlines about their having sold car insurance to people without any rationale, whatsoever.

Frankly, I view the Wells Fargo problems and the Volkswagen problems as being perhaps the most remarkable, because they involved the greatest number of people, and therefore speak directly to a corporate culture that created incentives to act in a way that was blatantly illegal.

In other conspiracies, like the Libor conspiracy, the criminal acts arose among a limited number of people who saw the opportunity to garner significant upside, they thought, in a way that won’t be detected. What is remarkable this time is that you have that many people involved, and you say, “how could that possibly have happened?” That’s why the Wells Fargo saga, both round one, with the false accounts, and then round two, with the auto insurance, and Volkswagen surreptitiously avoiding the emissions detection, are absolutely staggering to me in terms of the scope of the conspiracy.

Even if there was a significant desire in the immediate aftermath of 2008 to do something—and Dodd-Frank did something—now the pendulum has swung back the other way with the new leadership at the Securities and Exchange Commission (SEC) and the Office of the Comptroller of the Currency (OCC) affirmatively saying, “We want to roll back those obligations (the few obligations that were imposed) and become more lenient,” because they believe that these obligations were stifling economic activity, which I honestly don’t think is the case.

GR: You mentioned the actions taken by the current administration, but before that there were eight years of the Obama administration, and Democrats have been in power for 16 of the last 24 years.

ES: I say none of this to suggest that the Justice Department under Eric Holder should be held out as an example. Just the opposite. [Former Assistant Attorney General for the Criminal Division of the Department of Justice] Lanny Breuer’s articulation of “too big to prosecute goes down as, on the one hand, the most honest and also the most disturbing statement made by the head of the Criminal Division in the Justice Department.

It would frankly have been more understandable for the Treasury Secretary to say, “Guys, we consider these are the implications.” But for the head of the Criminal Division to basically give carte blanche by saying, “You’re too big to prosecute,” was mind-boggling.