Richard Bowen: Is the Fed Really Interested In Protecting Consumers or Is It just Lip Service?

By Richard Bowen, CitiBank Whistleblower

Eric Ben Artzi … is a former risk officer at Deutsche Bank. Mr. Ben-Artzi was one of three former Deutsche Bank employees turned whistleblowers who in 2010-2011 notified regulators of improper accounting at Deutsche. What was discovered resulted in a five-year investigation and a $55 million settlement between Deutsche Bank and the SEC. While Mr. Ben-Artzi was entitled to 15 percent of the award, he publicly rejected the multimillion dollar award. He shines as an example of a whistleblower who truly wants to change the system without any personal monetary or other gratification.

In his most recent post, he reminds us to not let the political upheaval in the U.S. and abroad cloud our judgements and common sense and hide what is still not happening to correct the situation. Government continues to exhibit an abject failure to correct the underlying causes of the “culture that wreaked havoc on the financial system.”

He says, “Fortunately, every now and then a tone-deaf bureaucrat inadvertently reminds us of how far our institutions have strayed from their obligation to serve the public.” His example,  

“William C. Dudley, President and CEO of the Federal Reserve Bank of New York, recently addressed the UK’s Banking Standards Board in London (BSB). Mr. Dudley’s speech capped several years of joint work by the New York Fed and the BSB on the issue of reforming the culture of banking.”

In that speech, Mr. Dudley pointed out a benchmarking survey conducted by the BSB which stated that of the 28,000 or so responders in banking, nearly 30 percent of them were worried about negative consequences if they raised concerns at work. Supposedly this culture of fear is what Mr. Dudley’s Fed and the BSB are attempting to change.

In a previous post, I pointed out how banks retaliate against brokers, employees and others for blowing the whistle, definitely a fixation with me as you might imagine. In that post, we talked about the culture of winks and nods and jobs for the boys, where too many people making bad decisions have gotten where they are for reasons other than excellence.

The culture of fear seems to permeate the financial services industry. Regardless of what steps Mr. Dudley may point out to “fix” the situation, the Fed, the SEC and other regulators and key officials still look the other way. Whom do we, should we believe? The facts frankly say not the Fed and other regulatory agencies.

A prime example of the out of control behavior by our regulatory agencies is the Wells Fargo situation. Comptroller of the Currency Thomas Curry said during a congressional hearing in September, soon after the bank’s $185-million settlement with the OCC and other regulators, that he had ordered a review of the OCC’s supervision of Wells Fargo. Wednesday’s report is the product of that review.

In a recent report, the Office of the Controller of the Currency (OCC) admitted to lax oversight on its part toward Wells Fargo, missing many opportunities to address its wrongdoing. The report goes on to say, “The OCC did not take timely and effective supervisory actions after the bank and the OCC together identified significant issues with complaint management and sales practices.”

This lack of oversight has to date resulted in significant lawsuits and settlements. The report points out that in 2010 the bank examiners met with Carrie Tolstedt,  the former Wells Fargo executive, then in charge of the community banking division which was at the center of the unauthorized accounts scandal.  While the examiners asked about the 700 whistle-blower complaints of workers “gaming” the bank’s sales goal system so they could receive more compensation, after that initial meeting the investigation was dropped. The OCC looked the other way and the fraud continued.

Some lawmakers, including  Rep. Jeb Hensarling (R-Texas), the chairman of the House Financial Services Committee have also asked why the  OCC and the Consumer Financial Protection Bureau had not identified  problems at the bank earlier. A spokesman said Wednesday that it seems clear the agency failed in this case; in just this case!! Really??

“If there was ever a case where consumers needed regulators to protect them, this was it, ”said Jeff Emerson, a spokesperson commenting on the report. “Yet obviously Washington regulators, including the OCC, failed to do their jobs and let the American people down.”

The OCC did confront Carrie Tolstedt, then head of Wells Fargo’s community bank, about the stunning number of whistleblower claims. However, there are no records that show that federal inspectors “investigated the root cause,” or force Wells Fargo to probe it. And the OCC report also says that the Wells Fargo’s board of directors received “regular” reports going back to 2005 indicating that most ethics line complaints and firings were related to sales violations.

Our regulators and that includes the Fed do not have a culture which permits dissent.

In fact, their own retaliation against Fed whistleblower Carmen Segarra, for not going easy on the banks is another example.

The Fed’s actions during and after the financial crisis have raised serious concerns about its leadership’s priorities. It seems that it prefers the financial interests of America’s banking elite over those of the general public. Numerous examples of revolving doors (Mr. Dudley himself is a former Goldman Sachs chief economist) and conflicts of interest have been exposed in the Fed since the financial crisis.

The Fed needs to also be accountable. It has too much of its own dirty laundry; so how can it “fix” others issues?

14 Responses

  1. Interesting. Prudential Securities merged into Wachovia Securities – who then merged into — Wells Fargo. Wells Fargo escaped large settlement with the government. The large banks had contracts with GSEs.

    By the settlements with large banks that have occurred, those banks were the security underwriters, who, either first purchased the loans directly, or first purchased all the “derived” securities in the REMICs. Only cash flows are then passed on by the securities to subsequent investors (most likely by larger “derived” CDO).. Or, they were supposed to be.

    Wells Fargo got a pass.

  2. ANON- the security underwriters were indeed first in line for each amd every REMIC created.
    They also had to have been aware of what was going on. And yes, everyone overlooks the prospectus. I believe mine lists Prudential
    securities as underwriter. Havent looked at it in a couple of years. Also Chase Manhattan Bank of Texas, prior to merger with JP Morgan.

  3. Ian — I am not good with the English language. I am just angry – like everyone else here. The people were forsaken by the government settlements, which now prevents the real truth to come out. We all keep trying. What I am saying is that the security underwriters to the trusts are the ones that caused the financial crisis, and have hidden the truth. They have been able to continue to hide the truth because the government settlements came without investigation. I never see any legal cases in which the borrower goes against the security underwriters.

    Have to be careful what is written here. But, I do think the truth will eventually surface. Just hope it is still in time to help many. There is a reason for all the fake assignments, documents, etc.

    You always seem to catch onto everything, even when the message is subtle. . .

  4. Thanks ANON-
    What I lack in intelligence I make up for in stupidity! I was an English major in college and have a hard time with people misusing or butchering the language up. And further, when someone says something, what do they mean? And how does poor use of the language mislead people? Some Of it intentional, some just mistakes. And what about truth in labelling laws? How about warrantee vs guarantee? What’s the difference? What do the words mean, how are they used/misused?
    These are the things I consider whilen reading practically anything.

  5. And, one more thing. No one goes to the Prospectus. All go to the PSA. But, the prospectus gives you the purchasers of the “debt” — the security underwriters. You can see their names in the Prospectus – have to look for them. Then look at the big bank settlements — all against the security underwriters – who – either purchased the loans directly, or purchased the securities from the “fake” trust. Geez — no one goes to the Prospectus. Method of Distribution. Big Bank underwriters had contract with WHO????? Servicer to WHO????

  6. Ian — Credit reporting is under the FCRA – Fair Credit Reporting Act. Debt collection is under the FDCPA – Fair Debt Collections Practices Act. But, very astute of you to pick up on this. How and why did one have a debt collector at the onset of a mortgage refinance? Debt collection is after charge-off, or many months months of default. Any valid mortgage should be on someone’s balance sheet. None of these private entity trust loans were ever on anyone’s balance sheet. In order for securitization to occur,there must be a financial balance sheet asset, because securitization is simply the removal of on an on-balance sheet asset to an off balance sheet conduit. But, these loans never had a “home.” They went straight to off-balance sheet conduits – with a debt collector as the stated “creditor.”. Meaning they were never an asset on anyone’s balance sheet. If never an asset, the “asset” was previously charged-off. Simple accounting. The Fed did not purchase assets under TARP — they purchased “toxic securities.” Toxic because never derived from an asset. Securities must be derived from an asset. So simple, but, yet, have to admit – so brilliant. What could be better than higher interest rate debt collection?

    Again, very astute of you to pick this up.

  7. Thx ANON-
    I thought it was the Fair Debt and Credit Recovery Act. Hard to keep these things straight!
    But why, at the time of “refinance” were these in default, even if they weren’t?

  8. Homeowners and average American will go along with Hensnarling and Trump cut off the leg cure.

  9. Ian — yes — think you mean FDCPA. So, when people got a “refinance,” and the loan “supposedly” went to a (prearranged) private entity trust, were those people told at the refinance — “Your loan is declared in default. This is not really a mortgage refinance, but we will call it a mortgage refinance, and you will pay for it as a mortgage refinance, but it is not really a mortgage refinance.” Answer – NO. Did anyone get a notice before the so called refinance that their loan is in reported default? I don’t think so. So, who was the loan declared to be in default to – just prior to, or at the refinance? And, without disclosure to the people? You know too Ian.

    Yes — if paying a real mortgage to a real brick and mortar bank, phone calls will not be prefaced by: “We are a debt collector, and attempting to collect a debt.” You are correct.

  10. ANON- the FDCRA applies only to unsecured defaulted debt. When you hear “this call is from a debt collector” they are declaring themselves as collectors of unsecured debt.
    Has anyone here, when makimg a mortgage Payment to an actual bricks-and-mortar bank, had their phone call prefaced with “we are a debt collector: all calls……” ? Of course not.
    So the servicers admit that the “mortgage” debt they are collecting is unsecured: thats why all the dicuments are forged, fabricated, falsified, backdated- they never were secured.

  11. Neidermeier- exactly. Just as the automakers customers are the dealers. When sales are reported, they are sales to dealers, not consumers. There are 1.3 million unsold cars on dealers’ lots, but “car sales are great”. Another way to juice the numbers. Even though there are 200 auto backed receiveables trusts in serious trouble. Sound familiar?

  12. The feds’ only real concern is in issuing more and more new debt. Their customers are the member banks , so yes they do protect their customers.

  13. Debt collector attorney law firms are exactly that — debt collectors. How, and why, and when, did the debt get transferred/ sold? That is what is not disclosed. Anywhere or anyplace.

  14. Excellent article. I commend Bdn Artzi for his stance on this matter. Certainly a true patriot and totally unlike the Morrows in Montana who won their case, took their money and ran, and settlend with nasty old Bank of America on a totally confidential settlement basis!!!
    I have spoken with people at the Colorado Attorney Generals office and they have been honest and truthful that the “too big to fail” slogan of big racketting banks like Bank of America prevail because of ALL the unlimted funds and personnel they have to devote to the continuing racketeering that is STILL going on by bad attorneys like the Janeway lawfirm and others who are, more than likely, bankrolled by our very own governmetn and others. You can read about the lawsuit against crooked Janeway on behalf of the Colorado AG back in late 2014. Yet they all continue even after the 10th Circuit Court Ruling in Colorado last year relative to racketeering charges against Urban Settlement Services and nasty old Bank of America.
    In my humble opinion they should NOT be allowed into any courtroom in America based upon their actions as their hands are as dirty as it gets and little wonder since our very own government is part of the co-conspiracy. Millions of people have had their homes wrongfully foreclosed upon and this continues to this day!!! Semper Fi

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