OCC Head John Walsh needs to resign

submitted by anonymous reader

Regulatory agencies exist to protect the public, not the corporations they regulate. The head of the Office of Comptroller of the Currency doesn’t seem to understand that. But that’s not why John Walsh needs to resign.

The OCC was created to stabilize the economy, make it easier to conduct trade, and protect people’s savings. It didn’t do that. In fact, it ignored the warnings raised by others. But that’s not why John Walsh needs to resign.

His agency failed to anticipate the foreclosure crisis, and it overlooked bank criminality. Later John Walsh misled a Senate panel — and the general public — about the size of the problem. And even after being forced to clarify those misleading statements, Mr. Walsh keeps on repeating them. Whether by intent or ineptitude, he continues to misinform the public.

And that’s why John Walsh needs to resign.

The Interview

John Walsh keeps using deceptive language in order to minimize bank fraud.

This week he told the Financial Times that there were “a small number of cases where we felt there should have been a stop” to foreclosures. A “small number” — that’s the same phrase he used in testifying before a Senate panel.

Under pressure, he eventually conceded that there were probably “tens of thousands” of them, even by his own limited definition. But he didn’t explain that to the readers of the Financial Times when he used the same misleading phrase again.

Walsh also says that the problem of bank foreclosure fraud “came to light at the end of September… through some court proceedings.” That’s completely false.

Court filings on the topic have been public since 2009. (See US Bank vs. Ibanez, etc.) What’s more, eagle-eyed observers had been finding evidence of fraudulent foreclosure activity as far back as 2003 (we’ll make some more information available on that score shortly).

Walsh’s video interview is a slow-motion train wreck. He compares bank criminality to speeding — “as with speeding, if there’s a violation of law there will be penalties.” He announces unspecified penalties, but promises they’ll be less severe “if we find that not a lot of homeowners were injured” — which is exactly the “finding” he’s been jury-rigging the numbers in order to achieve.

( He also says that “subprime underwriting that was done within the national banks was done properly.” Interesting.)

Walsh makes it clear that he’s more interested in closing this case than he is in justice, or in preventing future crimes. We need to “complete the process,” he says, to “draw a line and get the industry to move on.”

People talk of “regulatory capture,” that process where an agency becomes a servant of the industry it regulates.

John Walsh is the Patty Hearst, the “Tania,” of regulatory capture. Yves Smith has more information on the OCC and Walsh, and asks: “What do we call the OCC? The Office of Capital Corruption? The Office of Criminal Capitulation?” Before we change its name, though, let’s change its leader.

How did it come to this?

Wildcat Banks and Dollars in Every Color

Regulators exist to protect the public, and John Walsh’s agency, the Office of the Comptroller of the Currency, exists to ensure that we have an honest and reliable currency and banking system.

Back in the nineteenth century, “wildcat banks” were springing up everywhere, issuing unreliable dollars that other banks often didn’t recognize at full value. Some estimates say that by 1860 there may have been as many as 10,000 different bank notes in circulation.

The federal government needed to stabilize the nation’s finances and establish a reliable national currency. (It needed to borrow money for the Civil War, too.) So it issued green dollars (“greenbacks”), and gave them its full guarantee.

The OCC was formed to make sure that banks were reliable and were handling the new currency properly. A dollar needed to be worth a dollar everywhere. (Some Libertarians want to go back to multiple currencies, but that’s a topic for another day.)

In a way, the OCC made the Sears catalog possible — and it helped make a national economy possible, too. It wasn’t formed “of the banks, by the banks, and for the banks.” The OCC was created to protect people’s savings, and to encourage commerce.

Enter John Walsh

John Walsh became the OCC’s chief of staff in 2005, the same year that the OCC issued a regulation prohibiting states from regulating national banks. That regulation was finally overthrown by the Supreme Court in 2009, but the OCC tied the states’ hands as the system collapsed.

Mr. Walsh joined the OCC when John Dugan, a former bank lobbyist and political apparatchik, was in charge. (Dugan consistently made statements that served his industry’s interests rather than the public’s and displayed an appalling ignorance of his business — or hoped for it from his listeners).

Walsh became acting head when Dugan’s term ended in 2010, and he’s been there ever since.

Walsh’s OCC recently took control of the Office of Thrift Supervision, too, and the OTC’s recent history of disgrace and failure was thoroughly documented in the Levin/Coburn Report on the financial crisis.

There were two important priorities for the head of the OCC when Mr. Walsh took the job: restore the public trust and confidence shattered by his predecessor, and ensure that similar regulatory breakdowns could never happen again. Walsh has failed at both assignments.

America’s Least Wanted: Covering Up

Of course, he’s not that John Walsh, the America’s Most Wanted guy. Unlike his namesake, this John Walsh doesn’t seem to want to catch wrongdoers. Instead of pursuing criminals and exposing them to public scrutiny, this John Walsh exposed his agency to public embarrassment by attempting to do the opposite.

Mr. Walsh told a Senate panel that “our work identified a small number of foreclosure sales that should not have proceeded [emphasis mine].” But his “small number” comment was only put in context afterwards, through an OCC spokesman who explained when pressed that the agency had only examined 2,800 foreclosures.

That’s less than three-tenth of one percent of the foreclosures underway at the time. So how could it have found a large number?

Walsh later conceded that the actual number of wrongful foreclosures might be “in the tens of thousands.” And even that number’s artificially small, since Walsh insists on a narrow and unreasonable definition of wrongful bank behavior.

As Reuters thoroughly documented, both Walsh’s methods and his statements were suspect. Since his testimony was widely reported, but the clarifications were not, Walsh managed to leave a permanently misleading impression with the American public.

The Sales Pitch

Said Walsh: “If there is any reassurance here, and there is sadly very little, it is that borrowers subject to foreclosure in our sample were indeed seriously delinquent.”

But why were they delinquent? In many cases people fell behind on their loans because predatory banks and loan servicers hit them with unfair, undeserved fines and additional fees.

Sometimes lenders forced a loan into delinquency with fraudulent fees, then justified a foreclosure because the borrower was behind on payments. Walsh has made this cynical industry argument his own.

Walsh comes across like a smooth salesman for the banks and mortgage companies he’s supposed to regulate. As his video interview with the Financial Times demonstrates,

Walsh even uses the industry’s slick phraseology (“improper” instead of “illegal,” for example) to describe massive, systematic, serial fraud by banks and loan servicers.

Even Financial Times reporter Tom Braithwaite succumbs, describing thousands of fraudulent documents with the industry-honed phrase “shoddy paperwork.”

Walsh has also suggested that $20 billion would be an unfairly high amount to levy on the banks, given the scale of their wrongdoing.

Actually, it’s extraordinarily low. We’ve laid out our argument in more detail elsewhere, but the U.S. housing market has lost ten trillion dollars in value — and homeowners have been left holding the bag.

Homeowners didn’t choose the appraisers, write the loan contracts, or hire PR firms to convince the public that homes were a fail-safe investment. Yet homeowners, not banks, are paying the price.

Time to resign

John Walsh doesn’t seem to understand his agency’s mission.

His organization missed the warning signs for the last crisis, and now he’s papering over a pattern of criminality by the institutions he supervises.

He’s “back-dating” foreclosure fraud, claiming it only surfaced last September.

That’s either because he intended to mislead his audience, or because he lacks a fundamental understanding of the most urgent matter before his agency.

He used slippery language to persuade some senators that only a “small number” of foreclosures were improper, was forced to concede it was a misleading statement, and then used the same language again.

He either did that despite the fact that it misled people once before, or because it misled people once before.

Whatever his reasons, it’s time for John Walsh to resign.

21 Responses

  1. Amen! Who does he serve at the pleasure of?

  2. Last night I caught a clip on cable Tv, I think RTC news. They were reporting on the financial crisis in Ireland. The result of the study was lack of regulation by the government and regulators, lacked loan standards by the banks, didn’t see it coming…………….

    in other words the same crap over here in the States. The same god damn reasons.

    Wow, how can this be?

  3. Oakland, tell Goldman you do by our terms or we default and send you IOU.



  5. I was certain I learned that Gov. Jerry Brown’s sister worked for Goldman Sachs as a Goldman exec.

    Here is part of article from Apr. 24, 2010 in LA Times:

    Brown, a Democrat and California’s attorney general, also has connections to Goldman, which was charged with civil fraud last week by the Securities and Exchange Commission. The links are his sister and a complicated financing deal made by the city of Oakland, where he served as mayor for eight years.

    That deal, known as an “interest rate swap,” was supposed to guarantee Oakland stability in its debt payments but is now costing the cash-strapped city $5 million a year. The agreement, which goes until 2021, has an estimated cancellation cost of $19 million. The city is trying to renegotiate it, and union officials representing government employees are calling on Goldman to let Oakland and other municipalities out of such agreements.

    The swap, like those entered into by many governments, began in 1998, the year before Brown took office. City officials renegotiated it in 2003, right before his sister, Kathleen Brown, the former state treasurer, began working for Goldman as the West Coast head of municipal finance. In 2005, when the city paid off the debt Goldman had arranged, it left the interest rate swap in place.

    Municipal officials said it made sense to do so because they would have had to pay $15 million to end the deal. That decision also continued a steady revenue stream for Goldman Sachs that has turned more favorable for the company and less so for the city as the economy has eroded……

  6. Was this article Richard (RJ) Eskow’s? I didn’t see credit given to him or was he our “anonymous reader.”


  7. A-Man: Someone told me that his sister was an executive in Countrywide and now works for B of A. Could that explain “things” here in CA?

  8. and of course on actual present market values.

  9. If California created a state bank, and all mortgages sold in California by the corrupt Wall Street/Bank cartel, and everybody defaulted, and the courts all agreed to escheat the homes to California, and then all agree to give present homeowners new mortgages from the Calif State bank at 2% interest on 15 year mortgages,

    we would have a nice glorious state again. We could even do away with property taxes and once again a homeowner would actually own his property till death.

  10. What is going on with Mr Jerry Brown of the State of California? Why is he still allowing the Banksters to continue with their bogus Foreclosures and conduct business in this Glorious State of California?

  11. I can tell tales about Plano TX where the OCC’s consumer response center is located.
    Here’s a fictional example of a communication that may have some similarity to actual written correspondence from the OCC. By most reasonable analysis, many borrowers have been ripped off, lied to, drawn around the bend, you’ve had your credit and finances destroyed, been depressed, experienced PTSD inducing levels of stress, tried to find work, applied for food stamps, moved your possessions into a public locker and are soon going to be thrown on the street. So you write to the OCC about communication problems with your Bank, and the response goes something like this. “BUT YOU DIDN’T PAY YOUR DEBTS, DID YOU, LOSER??!!! HOW DARE YOU COMPLAIN ABOUT ANYTHING!! “

  12. OCC support only banks. I have a Citi Business Creditcard with 30 % out of the blue last year , a complaint to OCC was never answered. I think if Citi has to lower the interest rate, the out of business. Everythink goes to the Attorneys ,it can not cost enough.

  13. NOT submitted by me — ANONYMOUS (all caps)

  14. When Dugan left, he was immediately hired by a powerful DC law firm. It’s unfortunate we can’t discuss these big powerful pro-bank lobbying firms.
    The OCC is basically told what to do by the industry, not the other way round. Dugan was a bank lobbyist, whom Bush appointed and Obama allowed to continue until he left a year+ later.

  15. All I really want to know is how he sleeps at night. If u were responsible for making half the us homeless, how can u rest peacefully? How can he live with himself? How does he look at the man in mirror ?? How can he continue to LIE and cover up for the banks and big finance? How has it gotten to this point? And the judges? How can they keep pretending they are retarded and unaware of the laws they swore to uphold? Our justice and financial systems are corrupt to the core with all our neighbors watching. Do u think anyone will ever trust the US again? If our government is screwing our very own people what would they do to our neighbors and allies? Fuk them too. With a hard rough object. Our government needs to be impeached or over thrown. How has it come to this?? How? Get rid of the asshole john walsh- not the good one either– john walsh- if it were different times, I’d love to hang u from a tree in my front yard for target practice – and I have already had lots of practice. One in the nuts would be a very good start. If john has kids good luck raising the future liars and thieves. John walsh you are a liar and need to be thrown out and punished by the people not the “justice system” which apparently is only good for those who make under 100k a year. Nice system–more like the system from the devil himself. Have fun with the Devil, John. At first it may seem fun but he has big plans for you too. Have fun rotting in hell. Debi

  16. Ah, Neil or whoever is minding the store there…this “anonymous” post is actually cut and pasted from Huffington Post. Just don’t want you guys getting in trouble…

  17. I have evidence of fraudulent activity” dating back to march 2003. In the case, a Note was proffered as foundation for a Motin for Summary Judgment in a state foreclosure case. the copy of the Note was not Indorsed, so the issue of Standing immediately arose. Plaintiff Banker claimed the matter was resolved by virtue of an Indenture the provided grounding for the plaintiff’s claims. The Plaintiff could not produce the Indenture. Court granted Plaintiff a two-month delay to find the document or a copy. Sure enough, a fancy 97-page Indenture was offered, which the Court accepted.

    Except: upon very close inspection, it turns out the notary stampt showed an expiry that would have made it impossible for the notary to have his commission at the time of the stamping. The undertaking was a fraud, and the entire 197-page Indenture was fabricated!

    Believe nothing from these bums. This one was Deutsche bank.

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