OneWest’s Mnuchin: Putting the Fox in Charge of the Henhouse


There two ways of looking at this prospective appointment by President-Elect Trump.

One is that this appointment signals the intent to further “expedite” foreclosures instead of digging deeper into the real facts and fraud by Wall Street banks. Such an effort would eliminate the possibility of the US Treasury clawing back huge sums of money for nonexistent bank losses stemming from alleged defaulted loans.

Some may remember that the infamous TARP bailout was first described and approved as covering losses from the loans to residential homeowners. Then it evolved.  The description and approval was to cover losses from failed mortgage bonds. But neither defaults nor bond failures were actual losses of the banks.

They had sold the loans and bore no risk. And they were selling bonds not buying them. Then it evolved again. The description and approval was to cover lost profits on hedge products, insurance and credit default swaps, at which point it became a relief program for “troubled assets” which was code for giving the banks additional profit after already having gouged the US economy.

OneWest benefited from a cozy government relationship, over the objections of Sheila Bair, head of the FDIC. Like Chase, Wells Fargo, Citi, BOA and others OneWest acquired servicing rights but also was allowed to take the position that it owned loans acquired from its takeover of IndyMac, which had been addicted to fees generated from apparent “originations.”

The foreclosures that ensued resulted in a windfall profit to OneWest. Mnuchin was the organizer of OneWest, collecting up several billionaires around the country to create OneWest and do the deal with the FDIC in which it created the illusion of buying loans. But OneWest then got out of the business.

So I am reminded of history when FDR appointed one of the worst insiders to Wall Street schemes as first Chairman of the SEC. That was none other than Joseph Kennedy, the father of JFK. Wall Street cheered, being under the mistaken impression that they were free to create more schemes and defraud more people out of what was left in household and individual wealth.

Instead Joe Kennedy took the job seriously and was instrumental in creating numerous reforms and enforcement proceedings that shook Wall Street to its core — giving them pause before initiating some other fraudulent scheme. Republicans have been chipping away at that legacy for decades.

So the other possibility here is that the appointment of Mnuchin might be a replay of the appointment of Joe Kennedy. Mnuchin is the one guy who understands where the bodies are buried and understands how the latest meltdown was triggered by Wall Street fraud. He might be the right one to tackle this unprecedented problem without bringing down the entire financial system. If so, the TBTF banks might be redesignated as TBTE (Too Big To Exist).

If that dream comes true, then homeowners might get the relief necessary to recalibrate the US economy that is 70% dependent upon consumer spending. And it might just be acknowledged by government that what happened was a double blind fraud: institutional investors and individual homeowners were both victims that were entitled to reparations. And perhaps there will be created a mechanism for putting those two groups of victims together to salvage the “asset values” on their books.

5 Responses

  1. Reblogged this on Deadly Clear and commented:
    We can only hope there is enough righteousness lingering inside Mnuchin – but probably the best person to ask that question to would be Mike Perry the former IndyMac CEO that NY Dem. Senator Chuck Schumer’s rumor took down while his vulture pals waited in the wings.

  2. And pigs might fly, Mnuchin is not going to reimburse all those people whose equity and homes he stole he made billions and wants to keep that money. He could care less about the people who suffered at the hands of one worst bank under his rule. It is a farce, unless he agrees to fully compensate all the homeowners he stole from and that will never happen.

  3. One can hope. We were told Tim Gheitner knew where the bodies were buried and he helped bury us. Homeowners pro Trump or pro Hillary need to speak up.

  4. lets hope you are correct on this Neil as I am sure trump cashed in on some of those wrongful foreclosures. Maybe it takes an insider like him to get to the root of the evil that has been done to hard working americans that got their homes stole from them. Trump better not turn the other cheek on this. I believe many of his voters were people that this happened to and obama only mask the fraud further or he was no strong enough to do RIGHT for the homeowners.

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