DON’T SAY THE F-WORD EVEN IF IT CURES THE PROBLEM

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A Political Divide Over the Inquiry of the Financial Crisis

The investors are saying it, the homeowners are saying it, even some governments are saying it, and nobody is denying it. Instead we hear double speak about excessive risk-taking and leverage.

We are living a lie and the consequences are disastrous and still coming at us. Until we are willing to state openly that the giants of our financial system were co-venturers in a giant FRAUD, we will have no money, no credibility, and no credit. Until we allow that fancy fiscal tools and economic policies cannot undo the the myth of $600 trillion in proprietary currency, we will continue to be at the mercy of Wall Street.

It’s time for government to do its job. Call it what it is and apply the law that we have developed over centuries. If government won’t do it then the people should.

By SEWELL CHAN

WASHINGTON — The government inquiry into the causes of the 2008 financial crisis was the focus of intense partisan bickering on Wednesday at a House hearing. Republicans called the final 545-page report a political exercise whose findings were mostly inevitable, while Democrats defended its main conclusion: that Wall Street risk-taking and regulatory negligence combined to produce an avoidable disaster.

The final report of the panel, the Financial Crisis Inquiry Commission, has become a modest best seller; the original print run of 25,000 paperback copies has sold out. But the partisan argument over its findings could blunt its lasting impact.

The divisions within the House Financial Services Committee, which summoned six of the commission’s 10 members to testify, mirrored the panel itself: six members appointed by Democrats endorsed the conclusions, which were released last month, while the four named by Republicans produced two separate dissents.

“From the beginning, I thought that the commission was created for political purposes, with a partisan structure and a partisan agenda,” the commission’s vice chairman, Bill Thomas, a Republican, testified.

The commission’s chairman, Phil Angelides, a Democrat, tried to play down the differences. “While commissioners were not unanimous on all issues or on the emphasis we placed on the key causes of the crisis, there were, in fact, many areas of agreement,” Mr. Angelides said, while also calling the document “a valuable and accurate historical account” of the crisis and the events leading to it.

Republicans lambasted the report as flawed. Representative Ed Royce of California said the document did not place sufficient blame on Fannie Mae and Freddie Mac, the government finance entities. (The report found that they were not central to the crisis.)

Representative Patrick T. McHenry of North Carolina said the document was “a clipping service” of previously published findings, and Representative Francisco R. Canseco of Texas called it merely “a step-by-step accounting of the crisis.” (Though most of its findings were no surprise, the commission held 19 days of hearings, conducted 700 interviews and gathered millions of pages of documents.)

Representative Robert Dold, Republican of Illinois, said Democrats had used the report “to support pre-established political philosophies.” Representative Michael Grimm, Republican of New York, said some commissioners were “more interested in following an ideological agenda than in producing a report that would assist Congress.”

Democrats defended the commission’s findings.

Representative Maxine Waters of California suggested that the critics were trying to detract attention from the panel’s findings. “My fear is that some of my colleagues will try to rewrite history, and perhaps some of those in the public, listening to their messages, will forget the true cause of how we got here,” she said.

Of the four Republicans who dissented, three, including Mr. Thomas, did not substantially disagree with the Democratic majority. Mr. Thomas said the main differences were: a focus on a global credit bubble fed by capital flows across borders, which the majority did not emphasize; Republicans favored less attention to the structure of the mortgage finance system in the United States, since other countries with very different mortgage systems also experienced housing crashes; and also an emphasis on problems financial services firms shared — like concentrated exposure to housing and poor risk management — rather than failures of individual executives and regulators.

“However, when you are looking for victims and villains, rather than essential causes, you can examine the same set of facts and arrive at diametrically different conclusions,” Mr. Thomas said.

Mr. Angelides said the majority did not pull its punches. For example, he noted that the report assailed as inadequate the Federal Reserve Bank of New York’s oversight of Citigroup, the banking giant that ultimately needed a federal bailout.

At the time, the New York Fed was led by Timothy F. Geithner, now the Treasury secretary. It was Citigroup’s primary regulator, though it shared the duties with other regulators whose failings were also cited.

“We found, without regard to party, without regard to private sector or public sector, that this crisis was avoidable,” Mr. Angelides said.

Mr. Thomas questioned that conclusion, citing testimony by the financier Warren E. Buffett, who said that no one had anticipated a nationwide fall in home prices. “If Warren Buffett didn’t know it was coming, how can you say, very nonchalantly, it all could have been avoided?”

The impact of the report was already blunted by the fact that the Dodd-Frank Act, a far-reaching overhaul of financial regulation, was signed into law in July.

Mr. Angelides offered a strong endorsement of the new law, saying it had addressed many of the failings examined by the commission, which was responsible for looking at causes, not recommending solutions. Mr. Thomas, in contrast, called the law a case of “regulatory overreach.”

That the report was recording healthy sales — even though it is available free at fcic.gov — was nearly the only development that was not met with partisan rancor. Though the proceeds will go to the government, one skeptic, Representative David Schweikert, Republican of Arizona, quipped, “I’m really beginning to question Americans’ reading habits.”

20 Responses

  1. What? “Fraudclosure”? Is that now a word that’ll get you put on the no-fly list and labeled as a terrorist?

  2. And now ….for something Completely Different:

    Phila. homeowner wins judgment against Wells Fargo over mortgage fees
    February 15, 2011|By Jeff Gelles, Inquirer Columnist

    It’s not clear how this story will turn out, but right now Patrick Rodgers is living a pay-back fantasy probably shared by millions of struggling U.S. homeowners.
    Frustrated by a dispute with Wells Fargo Home Mortgage and by his inability to get answers to questions, the West Philadelphia homeowner took the mortgage company to court last fall.
    When Wells Fargo still didn’t respond, Rodgers got a $1,000 default judgment against it for failing to answer his formal questions, as required by a federal law called the Real Estate Settlement Procedures Act.
    And when the mortgage company didn’t pay – does something sound familiar? – Rodgers turned to Philadelphia’s sheriff.
    The result: At least for the moment, the contents of Wells Fargo Home Mortgage, 1341 N. Delaware Ave., are scheduled for sheriff’s sale on March 4 to satisfy the judgment and pay about $200 for court and sheriff’s costs.
    Rodgers has even written his own headline: “Philadelphia homeowner ‘forecloses’ on Wells Fargo.”
    Has he really? Not quite. But Rodgers, who lives in the city’s Wynnefield Heights section, won at least a momentary upper hand in a fight with Wells Fargo that began nearly two years ago.
    Before you leap to conclusions, let’s get a few things straight.
    Rodgers isn’t unemployed, or a deadbeat. He’s a music promoter who owns Dancing Ferret Concerts – if industrial, electronic, or goth is your sound, maybe you’ve been to one of his gigs. He says he’s paid all he owes under the terms of his seven-year-old mortgage.
    And there’s no reason to think that Rodgers’ house is “underwater” – worth less than he owes, in banker jargon that has sadly entered Americans’ everyday lexicon.
    Actually, it was the value of Rodgers’ home that apparently sparked the dispute – not what he paid, or what it would fetch if he wanted to move, but what it would cost to fully restore the house if, say, it was struck by a meteorite and burned to the ground.
    Rodgers owns a three-story, six-bedroom Tudor on a beautiful street not far from City Avenue. He paid about $180,000 for it in 2002, and for years handled his mortgage without dispute.
    But in mid-2009, his insurer delivered troubling news: His homeowners premium would more than double, because Wells Fargo was insisting that he insure the home’s full replacement value – about $1 million worth of coverage, the insurer told him.
    Rodgers loves his home, neighborhood, and adopted city – he moved here about 17 years ago, after growing up as a child of American parents in the Bahamas.
    But he knew that he paid a fraction of what his home would command elsewhere, such as across City Avenue in Bala Cynwyd. That’s one advantage of living, as he says, “a short clip away from the wrong side of the tracks.”
    In such situations, most lenders require a homeowner to insure for a total approximating a home’s market value – a good thing for large swaths of Philadelphia, where a home’s market value may have little relation to what it would cost to rebuild stone by stone or feature by feature.
    Wells Fargo takes a different tack.
    “Generally, we require hazard insurance that is equal to full replacement value of the property and structure,” Wells Fargo spokesman Jason Menke told me.
    Menke insists that the requirement “is primarily there to provide benefit to the customer.” Without full-replacement coverage, he says, a total loss “would have a significant impact on a homeowner’s ability to rebuild or replace the property.”
    Some consumer advocates beg to differ, noting that a homeowner might be willing to move elsewhere rather than to reconstruct a home to century-old standards.
    “It’s a completely unreasonable demand,” says Irv Ackelsberg, a mortgage expert at the Philadelphia law firm Langer, Grogan & Diver. “Their interest is in protecting their mortgage, not ensuring that the house is rebuilt.”
    Rodgers’ next step put him at some risk, he concedes now. He refused to renew the higher-cost policy. Instead, Wells Fargo bought him so-called forced-placement insurance – a policy that typically costs much more than ordinary coverage and only protects the mortgage-holder’s interests.
    But he fought back with his suit under the Real Estate Settlement Procedures Act (RESPA). Last month, Wells Fargo sent him more than $1,000, and Menke says it intended to fully satisfy the judgment. “We had considered this matter closed,” he says.
    What about Rodgers’ four-page letter demanding answers about how much Wells is trying to charge him – charges that have added $500 a month to his statement?
    Menke says Wells Fargo sent a written response “within the last month.” As of Monday, Rodgers hadn’t seen it.
    But he did have his sheriff’s levy. Even if it’s just a trophy, it may be enough to make him a national hero.
    Contact columnist Jeff Gelles at 215-854-2776 or jgelles@phillynews.com.

  3. @usedkarguy, I’d like to read more about Lehman hiding billions in loans from its investors. Got a link or two?

  4. @John, now may be the time to strike en mass while they comtemplate. People please note. Now is the time to forward ahead somehow. Do not give up.

  5. @Ian.
    Agreed fully. I throw my arms in the air. As Karen says, we have to form a group. And as I say, people need t get people to show up for Court appearances. A group showing up for foreclosure hearings will have an impact. Afterall there are more of us then them.

  6. The absence of the f-word, fraud, from virtually every television newscast and print story shows what a great job the news media does brainwashing people. The majority really thinks that people buying too much house and lying on their mortgage apps has decimated every economy on earth, crippled pension funds,municipal budgets, county budgets,hightway departments, public works departments, parks departments,and IRAs. It is like living in a parallel universe. But I think all readers here are going full speed ahead, the truth will shine through.

  7. @ Karen P… when Ariana Huffington stops jetting around the Swiss Alps apes Davos in her personal helicopter let me know. Until then her and her ilk can not be trusted!

  8. Here is a link to MERS’ directive to its members not to do any more foreclosures in MERS’ name. It is dated February 16, 2011. This was found today at a site which appears to be credible:

    http://www.scribd.com/doc/49058973/49024862-MERS-Announcement-2011-01

  9. Neidermeyer, thanks for the findings link. However, my blood pressure goes up too much when I read it. From the report:

    The CDO machine had become self-fueling. Senior executives—particularly at
    three of the leading promoters of CDOs, Citigroup, Merrill Lynch, and UBS—
    apparently did not accept or perhaps even understand the risks inherent in the
    products they were creating. More and more, the senior tranches were retained by
    the arranging securities firms, the mezzanine tranches were bought by other CDOs,
    and the equity tranches were bought by hedge funds that were often engaged in
    complex trading strategies: they made money when the CDOs performed, but could
    also make money if the market crashed. These factors helped keep the mortgage
    market going long after house prices had begun to fall and created massive exposures
    on the books of large financial institutions—exposures that would ultimately
    bring many of them to the brink of failure.

    Yet they had no need to fear, for Paulson et al covered their rear/s. RAT BASTARDS!

  10. Warren Buffet owns the banks he is not to be trusted

  11. Report link http://c0182732.cdn1.cloudfiles.rackspacecloud.com/fcic_final_report_full.pdf

    Who here didn’t expect this? Where is the politician or law enforcement arm of the government that will finally end this by requiring a disollution of all these side bets and require a refund to the purchasers…

  12. People, if we are going to “take it to the streets,” WE MUST GET ORGANIZED!!!

    The Huffington Post is calling for Nationwide Meetups on Tues, March 8th.

    Link:

    http://www.meetup.com/HuffingtonPost/

    Organize this meetup in your city. This is your country, what do you want it to look like??? It is in your hands. ORGANIZE NOW!

  13. “Fed governor Sarah Bloom Raskin said procedural flaws like robo-signing and other efforts that cut corners….” yea like FRAUD -f word?
    the f word applies all around f u q , fed, fraud, take yer pick they all apply ..ffs

  14. hmm..BUT which F word..
    FUK,FED,FRAUD…
    all apply and are the cause & cure of this crisis.
    we must put a stop to 2 of em.
    the f-filter – now blocks posts??haha wtf

  15. What we need is plenty of rope and a tree….

    The federal bank regulator overseeing the nation’s largest lenders is pushing for a quick and modest settlement….

    But the OCC, known for its light-touch approach, is trying to come to a quick settlement….

    The agency is negotiating an agreement….

    The OCC is said to be rushing to settle in hopes of forcing the hand of other regulators on the federal and state level, weakening their efforts to extract a more meaningful resolution….

    Fed governor Sarah Bloom Raskin said procedural flaws like robo-signing and other efforts that cut corners….

    The OCC’s actions in trying to derail a more substantial settlement raises questions over the Obama administration’s delay in nominating the agency’s next leader….

    Its last chief (OCC), John C. Dugan, stepped down in August after his five-year term ended, and joined Covington & Burling LLP, where he leads the firm’s financial institutions group….

    The agency came under withering criticism for its lax oversight of the industry….

    The administration now faces an uphill battle to get a tough regulator in the role….

    http://www.huffingtonpost.com/2011/02/16/occ-settlement-foreclosure-investigation_n_824357.html

  16. Take it to the streets people..

  17. I have to agree that the last line of defense is We, the People. We need to stand up and be counted like they are doing in Egypt and Wisconsin.

    They will try to balance the budget on the backs of the poor, disabled, elderly, school children, etc. How can people vote for people that want to destroy the general populace? Remember, you can’t vote for your religion in this government, there is no religion and never has been. Also, use your own brain and vote intelligently, not just the way your parents voted.

    burmese8@yahoo.com

  18. Great post usedcarguy…

  19. Courtesy of Zero Hedge

    From Matt Taibbi of Rolling Stone:

    Why Isn’t Wall Street in Jail?

    Financial crooks brought down the world’s economy — but the feds are doing more to protect them than to prosecute them

    Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.

    “Everything’s fucked up, and nobody goes to jail,” he said. “That’s your whole story right there. Hell, you don’t even have to write the rest of it. Just write that.”

    I put down my notebook. “Just that?”

    “That’s right,” he said, signaling to the waitress for the check. “Everything’s fucked up, and nobody goes to jail. You can end the piece right there.”

    Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world’s wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.

    The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What’s more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even “one dollar” just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick “The Gorilla” Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.

    Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. “If the allegations in these settlements are true,” says Jed Rakoff, a federal judge in the Southern District of New York, “it’s management buying its way off cheap, from the pockets of their victims.”

    To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. “You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street,” says a former congressional aide. “That’s all it would take. Just once.”

    But that hasn’t happened. Because the entire system set up to monitor and regulate Wall Street is fucked up.

    Just ask the people who tried to do the right thing.

    Here’s how regulation of Wall Street is supposed to work. To begin with, there’s a semigigantic list of public and quasi-public agencies ostensibly keeping their eyes on the economy, a dense alphabet soup of banking, insurance, S&L, securities and commodities regulators like the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC), as well as supposedly “self-regulating organizations” like the New York Stock Exchange. All of these outfits, by law, can at least begin the process of catching and investigating financial criminals, though none of them has prosecutorial power.

    The major federal agency on the Wall Street beat is the Securities and Exchange Commission. The SEC watches for violations like insider trading, and also deals with so-called “disclosure violations” — i.e., making sure that all the financial information that publicly traded companies are required to make public actually jibes with reality. But the SEC doesn’t have prosecutorial power either, so in practice, when it looks like someone needs to go to jail, they refer the case to the Justice Department. And since the vast majority of crimes in the financial services industry take place in Lower Manhattan, cases referred by the SEC often end up in the U.S. Attorney’s Office for the Southern District of New York. Thus, the two top cops on Wall Street are generally considered to be that U.S. attorney — a job that has been held by thunderous prosecutorial personae like Robert Morgenthau and Rudy Giuliani — and the SEC’s director of enforcement.

    The relationship between the SEC and the DOJ is necessarily close, even symbiotic. Since financial crime-fighting requires a high degree of financial expertise — and since the typical drug-and-terrorism-obsessed FBI agent can’t balance his own checkbook, let alone tell a synthetic CDO from a credit default swap — the Justice Department ends up leaning heavily on the SEC’s army of 1,100 number-crunching investigators to make their cases. In theory, it’s a well-oiled, tag-team affair: Billionaire Wall Street Asshole commits fraud, the NYSE catches on and tips off the SEC, the SEC works the case and delivers it to Justice, and Justice perp-walks the Asshole out of Nobu, into a Crown Victoria and off to 36 months of push-ups, license-plate making and Salisbury steak.

    That’s the way it’s supposed to work. But a veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for protecting financial criminals. This institutional reality has absolutely nothing to do with politics or ideology — it takes place no matter who’s in office or which party’s in power. To understand how the machinery functions, you have to start back at least a decade ago, as case after case of financial malfeasance was pursued too slowly or not at all, fumbled by a government bureaucracy that too often is on a first-name basis with its targets. Indeed, the shocking pattern of nonenforcement with regard to Wall Street is so deeply ingrained in Washington that it raises a profound and difficult question about the very nature of our society: whether we have created a class of people whose misdeeds are no longer perceived as crimes, almost no matter what those misdeeds are. The SEC and the Justice Department have evolved into a bizarre species of social surgeon serving this nonjailable class, expert not at administering punishment and justice, but at finding and removing criminal responsibility from the bodies of the accused.

    The systematic lack of regulation has left even the country’s top regulators frustrated. Lynn Turner, a former chief accountant for the SEC, laughs darkly at the idea that the criminal justice system is broken when it comes to Wall Street. “I think you’ve got a wrong assumption — that we even have a law-enforcement agency when it comes to Wall Street,” he says.

    In the hierarchy of the SEC, the chief accountant plays a major role in working to pursue misleading and phony financial disclosures. Turner held the post a decade ago, when one of the most significant cases was swallowed up by the SEC bureaucracy. In the late 1990s, the agency had an open-and-shut case against the Rite Aid drugstore chain, which was using diabolical accounting tricks to cook their books. But instead of moving swiftly to crack down on such scams, the SEC shoved the case into the “deal with it later” file. “The Philadelphia office literally did nothing with the case for a year,” Turner recalls. “Very much like the New York office with Madoff.” The Rite Aid case dragged on for years — and by the time it was finished, similar accounting fiascoes at Enron and WorldCom had exploded into a full-blown financial crisis. The same was true for another SEC case that presaged the Enron disaster. The agency knew that appliance-maker Sunbeam was using the same kind of accounting scams to systematically hide losses from its investors. But in the end, the SEC’s punishment for Sunbeam’s CEO, Al “Chainsaw” Dunlap — widely regarded as one of the biggest assholes in the history of American finance — was a fine of $500,000. Dunlap’s net worth at the time was an estimated $100 million. The SEC also barred Dunlap from ever running a public company again — forcing him to retire with a mere $99.5 million. Dunlap passed the time collecting royalties from his self-congratulatory memoir. Its title: Mean Business.

    And the conclusion:

    So there you have it. Illegal immigrants: 393,000. Lying moms: one. Bankers: zero. The math makes sense only because the politics are so obvious. You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass. It’s not a crime. Prison is too harsh. Get them to say they’re sorry, and move on. Oh, wait — let’s not even make them say they’re sorry. That’s too mean; let’s just give them a piece of paper with a government stamp on it, officially clearing them of the need to apologize, and make them pay a fine instead. But don’t make them pay it out of their own pockets, and don’t ask them to give back the money they stole. In fact, let them profit from their collective crimes, to the tune of a record $135 billion in pay and benefits last year. What’s next? Taxpayer-funded massages for every Wall Street executive guilty of fraud?

    The mental stumbling block, for most Americans, is that financial crimes don’t feel real; you don’t see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They’re crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let’s steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They’re attacking the very definition of property — which, after all, depends in part on a legal system that defends everyone’s claims of ownership equally. When that definition becomes tenuous or conditional — when the state simply gives up on the notion of justice — this whole American Dream thing recedes even further from reality.

    Read more: http://www.benzinga.com/11/02/867056/matt-taibbis-latest-why-isnt-wall-street-in-jail#ixzz1EEgXvgeR

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