David Dayen via The Intercept: Stealth Attack on Wall Street Bank Reform foams the runway for the next Financial Crisis

Editor’s Note:  S.2155 is known in Washington as the Crapo bill.  A fitting name.  Even Georgetown Law professor and former CFPB adviser Adam Levitin in a blog post warns the dangers of further bank deregulation.  This bill functionally exempts 85% of US banks and credit unions from fair lending laws in the mortgage market

By David Dayen/The Intercept


In mid-January, Citigroup executives held a conference call with reporters about the bank’s fourth-quarter 2017 earnings. The discussion turned to an obscure congressional bill, S.2155, pitched by its bipartisan supporters mainly as a vehicle to deliver regulatory relief to community banks and, 10 years after the financial crisis, to make needed technical fixes to the landmark Wall Street reform law, Dodd-Frank.

But Citi’s Chief Financial Officer John Gerspach told the trade reporters he thought that some bigger banks — like, say, Citigroup — should get taken care of in the bill as well. He wanted Congress to loosen rules around how the bank could go about lending and investing. The specific mechanism to do that was to fiddle with what’s known as the supplementary leverage ratio, or SLR, a key capital requirement for the nation’s largest banks. This simple ratio sets how much equity banks must carry compared to total assets like loans.

S.2155 did, at the time, weaken the leverage ratio, but only for so-called custodial banks, which do not primarily make loans but instead safeguard assets for rich individuals and companies like mutual funds. As written, the measure would have assisted just two U.S. banks, State Street and Bank of New York Mellon. This offended Gerspach. “We obviously don’t think that is fair, so we would like to see that be altered,” he told reporters.

Republicans and Democrats who pushed S.2155 through the Senate Banking Committee must have heard Citi’s call. (They changed the definition of a custodial bank in a subsequent version of the bill. It used to stipulate that only a bank with a high level of custodial assets would qualify, but now it defines a custodial bank as “any depository institution or holding company predominantly engaged in custody, safekeeping, and asset servicing activities.”) The change could allow virtually any big bank to take advantage of the new rule.

Multiple bank lobbyists told The Intercept that Citi has been pressing lawmakers to loosen the language even further, ensuring that they can take advantage of reduced leverage and ramp up risk. “Citi is making a very aggressive effort,” said one bank lobbyist who asked not to be named because he’s working on the bill. “It’s a game changer and that’s why they’re pushing hard.” A Citigroup spokesperson declined to comment.

A bill that began as a well-intentioned effort to satisfy some perhaps legitimate community bank grievances has instead mushroomed, sparking fears that Washington is paving the way for the next financial meltdown. Congress is unlikely to pass much significant legislation in 2018, so lobbyists have rushed to stuff the trunk of the vehicle full. “There are many different interests in financial services that are looking at this and saying, ‘Oh my God, there’s finally going to be reform to Dodd-Frank that may move, let me throw in this issue and this issue,’” said Sen. Chris Coons, D-Del., in an interview. “There are a dozen different players who decided this is the last bus out of town.”

And Coons is a co-sponsor of the bill.

A hopeful nation — and the president himself — expected that the Senate would begin debate on major gun policy reform next week, but instead a confounding scenario has emerged: In the typically gridlocked Congress, with the Trump legislative agenda mostly stalled, members of both parties will come together to roll back financial rules, during the 10th anniversary of the biggest banking crisis in nearly a century. And it’s happening with virtually no media attention whatsoever.

Aside from the gifts to Citigroup and other big banks, the bill undermines fair lending rules that work to counter racial discrimination and rolls back regulation and oversight on large regional banks that aren’t big enough to be global names, but have enough cash to get a stadium named after themselves. In the name of mild relief for community banks, these institutions — which have been christened “stadium banks” by congressional staff opposing the legislation — are punching a gaping hole through Wall Street reform. Twenty-five of the 38 biggest domestic banks in the country, and globally significant foreign banks that have engaged in rampant misconduct, would get freed from enhanced supervision. There are even goodies for dominant financial services firms, such as Promontory and a division of Warren Buffett’s conglomerate Berkshire Hathaway. The bill goes so far as to punish buyers of mobile homes, among the most vulnerable people in the country, whose oft-stated economic anxiety drives so much of the discourse in American politics (just not when there might be something to do about it).

“Community banks are the human shields for the giant banks to get the deregulation they want,” said Sen. Elizabeth Warren, D-Mass., who is waging a last-minute, uphill fight to stop the bill. “The Citigroup carve-out is one more example of how in Washington, money talks and Congress listens.”

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David Dayen at the Intercept: The Repeal of Dodd-Frank is a Wishlist for Deregulation and Big Bank Monopolies


The Treasury Department’s first report recommending changes to the financial regulatory system wildly differs from the plan to dismantle Dodd-Frank that House Republicans passed — and the Trump administration endorsed — just last week. In fact, the report attacks the central mechanism in the House GOP’s bill, even while paying lip service to considering it.

That doesn’t make it benign, however. The Treasury report, compiled with the assistance of 244 different banking industry groups, often cites or lifts directly from bank lobbyist briefing papers. It identifies numerous ways that regulators could go around Congress and significantly undermine the already weakened rules in Dodd-Frank. It’s a wish list for deregulation — but one that could actually get done.

The report was mandated by a February 3 executive order, where President Trump identified core principles for regulating finance. Treasury was supposed to report by June 3 on conforming all financial laws and policies to those core principles. Last month Treasury admitted they couldn’t get such a review done on time, and would instead do it in stages. This report, publicly released nine days after the deadline, only covers banks and credit unions.

But in between that time, the House passed the CHOICE Act, bank lobbyist fantasy legislation that would eliminate most of Dodd-Frank’s core rules. The “choice” in the CHOICE Act, the bill’s signature element, allows banks to opt out of most enhanced regulatory requirements if they maintain a ratio of liquid assets to overall debt — known as the “leverage ratio” — of 10 percent. Every House Republican but one voted for the CHOICE Act.

This put Treasury in a bind, having to pass judgment on the legislation preferred by its party regulars. And in a couple places, they nod to the CHOICE Act, saying that “Treasury supports an off-ramp exemption … for any bank that elects to maintain a sufficiently high level of capital.” But this was almost certainly added in at the last minute. Because elsewhere in the document, Treasury completely contradicts and even savages the types of changes made in the CHOICE Act.

For example, the report asserts that “continual ratcheting up of capital requirements is not a costless means of making the banking system safer,” reflecting the banking industry’s desire to reduce, not increase, capital ratios like leverage. The more debt a bank can play with, the more money they can earn, so banks don’t want to be constrained by high leverage ratios. Treasury has their backs. In that paragraph, at least.

Furthermore, Treasury writes, “a capital regime that is exclusively dependent upon a leverage ratio” — in other words, the one being advocated by House Republicans — “could have the unintended outcome of encouraging risk-taking by banking organizations.” That’s because, under the GOP plan, all debt counts the same toward the ratio, so if banks want to make higher returns, they need to make riskier bets on the debt they take on. The report suggests, instead, a “risk-weighted” system, so as not to “discourage critical banking functions.”

There’s a lot of debate over this point — some experts find risk-weighting overly complex and easily gamed — but the point is that Treasury, while mouthing support for the CHOICE Act’s leverage ratio-dependent off-ramp, is attacking the entire concept of a leverage ratio. Though the Trump administration endorsed the CHOICE Act just last week, one of its most important financial regulatory agencies cut it to ribbons.

Treasury diverges with the House on other parts too. The House GOP wants to eliminate the Volcker rule, a mini-Glass-Steagall preventing banks that take deposits from engaging in risky “proprietary” trading on their own accounts. But Treasury “supports in principle the Volcker rule’s limitations on proprietary trading and does not recommend its repeal.” Both the House GOP and Treasury savage the Consumer Financial Protection Bureau (CFPB), but Treasury pulls back from repealing the agency’s critical ability to police unfair, deceptive and abusive acts and practices — it only says that that authority should be “more clearly delineated.”

Of course, Treasury and House Republicans share a wrongheaded view of financial regulation and its effect on the economy. That’s because both take their cues from the same sources. In an appendix, Treasury lists the organizations and individuals who provided input to them for the report. Sen. Sherrod Brown’s office ran the numbers, finding that Treasury consulted with 14 consumer advocates and 244 banking industry groups, a ratio of around 17-to-1.

You can see this influence in several places. The report goes on a long tangent about reducing regulatory requirements on boards of directors that is lifted from a report by The Clearing House, a major bank lobbyist. The section on CFPB cites the Heritage Foundation four times, the Republican staff of the House Financial Services Committee twice, Cato Institute fellow and Antonin Scalia Law School professor Todd Zywicki twice, a lobbyist for the American Bankers Association, conservative Congressman Patrick McHenry, and corporate law firm Ballard Spahr, which represents numerous financial institutions.

Just the authors of the report guaranteed its tilt in favor of Wall Street. Mnuchin was CEO and later chairman of “foreclosure machine” OneWest Bank. Craig Phillips, a Treasury aide, spent the housing bubble years creating fraudulent mortgage securities for Morgan Stanley.

That sets the stage for an orgy of spin and bad-faith arguing. Treasury claims that community banks and credit unions are being strangled by Dodd-Frank regulations, while citing an unbroken trajectory of small bank closures going back to 1984, 26 years before Dodd-Frank’s introduction. The report opposes regulatory fragmentation and overlap and calls for streamlining, but goes after the one Dodd-Frank action that streamlined a fragmentary regulatory framework, the CFPB, as holding too much authority. It blames regulations for low bank growth, not the slow recovery and lack of opportunities to profit. It laments that private mortgage-backed securities are well below the level from 2005-2007, as if the housing bubble should be seen as something to shoot for again.

This leads to a series of recommendations that regulators could accomplish on their own, without waiting for Congress to reach consensus. “A sensible rebalancing of regulatory principles is warranted in light of the significant improvement in the strength of the financial system and the economy,” the report argues, in a literal recounting of how the regulatory pendulum swings toward rolling back rules when people forget crises.

Treasury wants to coordinate bank supervision and enforcement actions spread across multiple regulators, reducing turf wars but also shrinking legal liability for banks. To show what it’s really after here, it wants to cut the FDIC out of the assessment process for living wills, the road maps banks create to unwind themselves in a crisis; the FDIC has been much more stringent on living wills than its counterpart, the Federal Reserve.

The report also calls for eliminating multiple burdens on small banks and credit unions, raising the exemption thresholds for stress tests, capital and liquidity rules, and supervision. But that tailoring doesn’t stop at small banks; even institutions with over $50 billion in assets would likely get relief.

Treasury wants to make stress tests and supervision “more transparent,” which is code for allowing banks to know when examiners will arrive and how to game the process. It also wants to reduce the frequency, with stress tests and living will plans every two years instead of annually. It wants to add multiple exemptions to nearly all capital rules, and would blow enough holes in the Volcker rule (including allowing proprietary trading up to $1 billion) that its support for the idea in principle would not extend to practice. It wants all regulators to engage in cost-benefit analysis in rulemaking, a way to bog the process down in bureaucracy — and to set up targets for lawsuits after the rules are written. It wants to roll back mortgage rules put in for borrower protection after a crisis that resulted in millions of foreclosures. There’s even a reference to targeting the Community Reinvestment Act, the law that makes sure banks lend in low-income communities, the mythical demon many on the right have taken to blaming for the entire financial crisis.

On the CFPB, Treasury recommends making the director removable at will by the president or making the agency a multi-member commission, and putting its funding structure through the appropriations process — all arguments Republicans and bank lobbyists made unsuccessfully during debate over the agency’s creation. But Congress would need to act there; in its place, Treasury supports actions a new director could take unilaterally, like favoring “cease-and-desist” notices over sanctions, making the consumer complaint database secret, and eliminating the agency’s authority to supervise financial institutions.

There’s basically something for every bank of every size here, with enough exemptions, reductions, and referrals back to the lowest common denominator to enable the industry to run wild. And most of it could get done behind closed doors, without a public vote on C-SPAN. “The Trump administration could unilaterally introduce major additional risks to our financial system,” said Americans for Financial Reform Policy Director Marcus Stanley in a statement.

It’s true that fulfilling this industry wish list would take time; regulators would have to traverse the laborious regulatory process to undo the rules, often with multiple agencies having to sign off. Plus, Trump hasn’t appointed key regulators needed to carry this out. But the industry has taken that path before to much success. Dodd-Frank already is a shell of what was envisioned, after insistent lobbying through the legislative and then the rule-making process. The banks will be happy to run the gauntlet again.

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David Dayen at The Intercept: Mnuchin Lied About His Bank’s History of Robo-Signing Foreclosure Documents

By David Dayen


Treasury secretary nominee Steven Mnuchin lied in his written responses to the Senate Finance Committee, claiming that “OneWest Bank did not ‘robo-sign’ documents,” when ample evidence proves that they did.

Mnuchin ran OneWest Bank from 2009 to 2015 in a manner so ruthless to mortgage holders that he has been dubbed the “Foreclosure King” by his critics.

The robo-signing scandal involved mortgage companies having their employees falsely sign hundreds of affidavits per week attesting that they had reviewed and verified all the business records associated with a foreclosure — when in fact they never read through the material and just blindly signed off. Those records, in many cases, were prepared improperly, but the foreclosures went ahead anyway because of the fraudulent affidavits.

Treasury Secretary-designate Steven Mnuchin listens while testifying on Capitol Hill in Washington, Thursday, Jan. 19, 2017, at his confirmation hearing before the Senate Finance Committee. Mnuchin built his reputation and his fortune as a savvy Wall Street investor but critics charge that he profited from thousands of home foreclosures as the chief of a sub-prime mortgage lender during the housing collapse. (AP Photo/J. Scott Applewhite)

Mnuchin on the Hill

Scott Applewhite/AP

“Did OneWest ‘robo-sign’ documents relating to foreclosures and evictions?” Sen. Bob Casey, D-Penn., asked Mnuchin as a “question for the record”.Mnuchin replied that “OneWest Bank did not ‘robo-sign’ documents, and as the only bank to successfully complete the Independent Foreclosure Review required by federal banking regulators to investigate allegations of ‘robo-signing,’ I am proud of our institution’s extremely low error rate.”

But even that review – which was not really so “independent,” since the banks hand-picked and paid for their own reviewers – found that nearly 6 percent of the OneWest foreclosures examined were not conducted properly.

And what sparked that review was a 2011 consent order issued by the federal Office of Thrift Supervision, which definitively stated that OneWest filed affidavits in state and federal courts “in which the affiant represented that the assertions in the affidavit were made based on personal knowledge or based on a review by the affiant of the relevant books and records, when, in many cases, they were not.”


This is the very definition of robo-signing. OneWest signed and agreed to the consent order, though it never admitted or denied the activity

However, in a Florida foreclosure case, a OneWest employee plainly admitted to robo-signing. On July 9, 2009 – four months after OneWest took over operations from IndyMac, with Mnuchin as CEO – Erica Johnson-Seck, a vice president with OneWest, gave a deposition in which she admitted to being one of eight employees who signed approximately 750 foreclosure-related documents per week.

“How long do you spend executing each document?” Johnson-Seck was asked. “I have changed my signature considerably,” Johnson-Seck replied. “It’s just an E now. So not more than 30 seconds.”

Johnson-Seck also admitted to not reading the affidavits before signing them, not knowing who inputted the information on the documents, and not being aware of how the records were generated. And she acknowledged not signing in the presence of a notary. This resulted in false affidavits being submitted in court cases that attempted to take borrowers’ homes away.

New York Supreme Court Judge Arthur Schack used the information provided by Johnson-Seck to invalidate OneWest foreclosure cases. He also dismissed a separate foreclosure where Johnson-Seck both assigned a mortgage to Deutsche Bank and executed an affidavit on behalf of Deutsche Bank in the same case.

OneWest continued filing sketchy documents for years, even after Johnson-Seck revealed the robo-signing scheme. According to a Reuters investigation in 2011, OneWest issued “foreclosure documents of questionable validity,” including filing mortgage assignments that establish ownership of the loan months after the foreclosure action, meaning OneWest (by their own evidence) didn’t own the loan at the time they decided to foreclose on the property.

Tara Bradshaw, a spokeswoman for Mnuchin during the transition, said she no longer works on the matter and referred all questions to the Treasury Department. The Treasury Department press office did not respond to a request for comment.

Mnuchin’s definitive – though false — statement about robo-signing stands in contrast to some of his other responses to questions for the record. Those he just ducked.

Responding to Sen. Dean Heller, R-Nev., who asked how many Nevada homes were in OneWest Bank’s portfolio and how many Nevadans suffered foreclosure at the hands of OneWest, Mnuchin replied, “Because I am no longer employed by or affiliated with CIT Group, I do not have access to this information.” CIT purchased OneWest in 2015, and Mnuchin left the bank’s board in December.

That was the eighth time that Heller has asked these questions of Mnuchin, according to Senate testimony.

Mnuchin used the same excuse to decline to give information about nationwide foreclosures or federal investigations into OneWest to Sen. Sherrod Brown, D-Ohio.

Similarly, when Sen. Maria Cantwell, D-Wash., asked Mnuchin if he believes that his former employer Goldman Sachs “acted responsibly and ethically when it bet against the same securities it was selling to its customers,” Mnuchin declined to answer, saying “I left Goldman Sachs nearly fifteen years ago” and was not in a position to comment.

Mnuchin was forced to respond to The Intercept’s publication of a leaked memo alleging that OneWest committed numerous violations of California’s foreclosure processes, including routine backdating of documents to speed up foreclosures. Sen. Casey asked about that, but Mnuchin insisted that “OneWest did not engage in ‘backdating.’” He explained that the bank assumed control of foreclosures initiated under IndyMac, its predecessor, and had a power of attorney to “step into those actions effective as of the date they were initiated.”

But that’s not what the investigators in the California Attorney General’s office alleged in their memo. They claimed that the substitutions of trustee documents in OneWest’s name were not created on the effective date written on the document. They argued that was done deliberately to cover up the lack of a substitution of trustee earlier in the foreclosure process.

David Dayen

David Dayen is a contributor to The Intercept, and also writes for Salon, the Fiscal Times, the New Republic, and more. His first book, Chain of Title, about three ordinary Americans who uncover Wall Street’s foreclosure fraud, will be released in May 2016.

David Dayen via The Intercept: Treasury Pick Steve Mnuchin Denies It, But Victims Describe His Bank as a Foreclosure Machine


Treasury Secretary nominee Steve Mnuchin kicked off his confirmation hearing Thursday with a defiant opening statement, mostly defending his record as CEO of OneWest Bank. He cast himself as a tireless savior for homeowners after scooping up failed lender IndyMac. “It has been said that I ran a ‘foreclosure machine,’” he said. “I ran a loan modification machine.”

But in stark contrast to his fuzzy statistics about attempted loan modifications, the victims of OneWest’s foreclosure practices have been real and ubiquitous.

A TV advertising campaign that’s been running in Nevada, Arizona, and Iowa features Lisa Fraser, a widow who says OneWest “lied to us and took our home” of 25 years, right after her husband’s funeral.

And on Wednesday, four women appeared at a congressional forum organized by Sen. Elizabeth Warren, relaying their stories of abuse at the hands of OneWest. Democrats had hoped to present the homeowners as witnesses at Mnuchin’s confirmation hearing, but were denied by Senate Finance Committee Chair Orrin Hatch.

The women’s stories share a remarkable symmetry to those of nearly a dozen OneWest homeowners reviewed by The Intercept over the past several days. They paint a picture of a bank that did more to trap customers than to help them through their mortgage troubles.

Mnuchin complained to senators that he has “been maligned as taking advantage of others’ hardships in order to earn a buck. Nothing could be further than the truth.”

Treasury Secretary-designate Stephen Mnuchin arrives on Capitol Hill in Washington, Thursday, Jan. 19, 2017, to testify at his confirmation hearing before the Senate Finance Committee. Mnuchin built his reputation and his fortune as a savvy Wall Street investor but critics charge that he profited from thousands of home foreclosures as the chief of a sub-prime mortgage lender during the housing collapse. (AP Photo/J. Scott Applewhite)

Treasury Secretary-designate Stephen Mnuchin arrives on Capitol Hill on Thursday, Jan. 19, 2017, to testify at his confirmation hearing before the Senate Finance Committee.

Photo: J. Scott Applewhite/AP

But the evidence to support that conclusion is considerable.

Heather McCreary of Sparks, Nevada, one of the four individuals in Washington to testify on Wednesday, was laid off from her job as a home health care provider in 2009. She and her family sought a modification from OneWest as they recovered from the lost wages. OneWest did modify the loan, one of the “over 100,000” such modifications Mnuchin touted in his hearing. But after six months of making modified payments, the bank denied McCreary’s personal check, claiming that the payment had to be made by cashier’s check. “I looked at the paperwork, and couldn’t find that on there,” McCreary said. “The Legal Aid person working with us couldn’t find it.”

OneWest told McCreary to re-apply for the modification twice, then cut off all communications and refused to accept payments. “A few months later we had a foreclosure notice taped to the window, with two weeks to get out,” she said. The bank was pursuing foreclosure while negotiating a modification — a practice known as dual tracking that is now illegal.

Tara Inden, an actress from Hollywood, California, couldn’t get a loan modification from OneWest after multiple attempts. Even after finding a co-tenant willing to pay off her amount due, OneWest refused the money and pursued foreclosure. Inden has fended off four different foreclosure attempts, including one instance when she returned home to find a locksmith breaking in to change the locks. “I took a picture of the work order, it said OneWest Bank on it,” Inden said. “I called the police, they said what do you want us to do, that’s the bank.”

Inden remains in the home today. OneWest gave her $13,000 as part of the Independent Foreclosure Review, a process initiated by federal regulators forcing OneWest and other banks to double-check their foreclosure cases for errors. Inden received no explanation for why she received the money, but sees it as a tacit admission that OneWest violated the law in her case.

Tim Davis of Northern Virginia had a mysterious $14,479 charge added to his loan’s escrow balance on multiple occasions, even after a U.S. Bankruptcy Court ordered it removed. “I don’t think that Mr. Mnuchin should be put in a position of government power without further scrutiny,” Davis said in an email.

Donald Hackett of Las Vegas claimed in legal filings that OneWest illegally foreclosed on them without being the true owner of his loan. He ended up losing the case, and the home. “They had to cheat to beat me,” Hackett alleged. “They came in like union busters to try to bust everybody up and scare you, make you afraid.”

While Hackett was unsuccessful, Mnuchin’s bank has been accused by investigators at the California attorney general’s office of “widespread misconduct” in foreclosure operations, with over a thousand violations of state statutes. The state attorney general, now-Sen. Kamala Harris, decided not to prosecute OneWest for the violations.

Teena Colebrook, an office manager from Hawthorne, California, came to prominence as a Trump supporter disgusted by the Mnuchin selection. She lost her home to OneWest in April 2015, after a yearslong battle that began with the loss of renters who shared the property. Colebrook was informed that the only way she could receive help from OneWest was if she fell 90 days behind on her mortgage payments. This was not true: qualifying for the government’s Home Affordable Modification Program, or HAMP, did not require delinquency, only a risk of default.

“They won’t tell you in writing and they’ll claim they never said that,” Colebrook said. She found robo-signed documents in her file, had insurance policies force-placed onto her loan unnecessarily, and kept getting conflicting statements about how much she actually owed. Late fees piled up, like outsized certified mailing costs of $2,000, all appended to her loan. She eventually ran out of appeals. “They wanted my property, wouldn’t accept any tender offers,” Colebrook said. “They stole my equity. That’s why I’m so angry. If [Mnuchin] can’t get one person’s figures right, how can he be in charge of the Treasury?”

Colebrook put together a complaint group on the Internet to share stories with other sufferers of OneWest. She found multiple people who said they were told to miss payments and then shoved into foreclosure. Others said they were put through year-long trial modifications (under HAMP they were only supposed to be three months long) and then denied a permanent modification, with an immediate demand for the difference between the trial payment and original payment, which could stretch into thousands of dollars. Others lost homes held by their families for decades.

These stories are familiar to those who experienced the aftermath of the financial crisis. OneWest was neither special nor unique in its urgency to foreclose and unwillingness to extend help to the broad mass of struggling borrowers. But Mnuchin’s nomination has put the spotlight back on a forgotten scandal of deception.

Wednesday’s unofficial hearing was the first in Congress in several years featuring homeowners. In the hearing room, Heather McCreary sat next to Colleen Ison-Hodroff, an 84-year-old widow from Minneapolis asked by OneWest to pay off the full balance due on her residence a few days after her husband’s funeral. Ison-Hodroff said OneWest could kick her out of her home of 54 years at any time. “Allowing an 84 year-old woman to be foreclosed on is not the American way,” McCreary said.

When OneWest foreclosure victims heard that Mnuchin was chosen to lead the Treasury Department, they were shocked. “When he was nominated, it was like the floor crashed underneath me,” said McCreary. “It brought back everything. His name was on my paperwork.”

Other victims offered similar remarks. “For someone who will be tasked with making sure that the economy is doing all it can for people like me, even when it seems the system is rigged against them, Steve Mnuchin is not that person,” said forum participant Cristina Clifford, who lost her condo in Whittier, California, after also being told by OneWest to fall behind on payments.

“I think the first thing is he belongs in a prison,” said Tara Inden.

The Mnuchin nomination can only be derailed through Republican opposition, which is relatively unlikely. But it has set off a new wave of activism nationwide.

Activists have been camped out at Goldman Sachs’s New York City headquarters since Tuesday, targeting Mnuchin’s former employer of 17 years. In an echo of a protest to save her home in 2011, OneWest customer Rose Mary Gudiel of La Puente, California, led a march in the rain to Mnuchin’s Bel-Air mansion on Wednesday night, placing furniture on his driveway before police dispersed roughly 60 activists. (Mnuchin famously scrubbed his address off the internet after the 2011 protest, saying his family was subjected to “public ire at the banking industry.” But the same organizers found his house again.)

“I put it in the middle of a resurgence of housing justice activism,” said Amy Schur of the Alliance of Californians for Community Empowerment. “Hard-hit communities are organizing across the country like they haven’t in years. Sometimes we might have kept eyes on the powers that be locally, but with the likes of Trump and this cabinet, we have to take this fight nationally as well.”

[David Dayen is live-tweeting the hearing here.]

Top photo: Protesters hold a sign during a demonstration outside of a Goldman Sachs office on Jan. 18, 2017, in Los Angeles. More than two dozen activists and foreclosure victims staged a demonstration outside of a Goldman Sachs office to denounce Steve Mnuchin, President-elect Donald Trump’s Treasury Secretary nominee.

Contact the author:

David Dayendavid.dayen@gmail.com@ddayen


David Dayen: Elizabeth Warren Asks Newly Chatty FBI Director to Explain Why DOJ Didn’t Prosecute Banksters


By David Dayen at the Intercept


Like a lot of other Americans, Sen. Elizabeth Warren wants to know why the Department of Justice hasn’t criminally prosecuted any of the major players responsible for the 2008 financial crisis.

On Thursday, Warren released two highly provocative letters demanding some explanations. One is to DOJ Inspector General Michael Horowitz, requesting a review of how federal law enforcement managed to whiff on all 11 substantive criminal referrals submitted by the Financial Crisis Inquiry Commission (FCIC), a panel set up to examine the causes of the 2008 meltdown.

The other is to FBI Director James Comey, asking him to release all FBI investigations and deliberations related to those referrals. The FBI typically doesn’t release investigative details about cases that the DOJ chooses not to pursue, but Warren pointed out that in releasing information about presidential candidate Hillary Clinton’s use of a private email server in July, Comey had pretty much shattered that precedent and set a new one.

“You explained these actions by noting your view that ‘the American people deserve those details in a case of intense public interest,’” Warren wrote to Comey. “If Secretary Clinton’s email server was of sufficient ‘interest’ to establish a new FBI standard of transparency, then surely the criminal prosecution of those responsible for the 2008 financial crisis should be subject to the same level of transparency.”

In other words, if Comey can spend hours relating FBI decision-making about State Department emails, he can do the same for the activity that made millions jobless and homeless.

The FCIC’s criminal referrals, which were sent to the Justice Department in October 2010, have never been made public. But Warren’s staff reviewed thousands of other documents released in March by the National Archives, including hearings and testimony, witness interviews, internal deliberations, and memoranda, and found descriptions and records of them.

They detail potential violations of securities laws by 14 different financial institutions: most of America’s largest banks — Citigroup, Goldman Sachs, JPMorgan Chase, Lehman Brothers, Washington Mutual (now part of JPMorgan), and Merrill Lynch (now part of Bank of America) — along with foreign banking giants UBS, Credit Suisse, and Société Generale, auditor PricewaterhouseCoopers, credit rating agency Moody’s, insurance company AIG, and mortgage giants Fannie Mae and Freddie Mac.

The FCIC presented the DOJ with evidence that these institutions gave false representations about the loan quality inside mortgage-backed securities; misled credit ratings agencies; overstated assets and earnings in financial disclosures; failed to disclose credit downgrades, subprime exposure, and the financial health of their operations to shareholders; and suffered breakdowns in internal company controls. All of these were tied to specific violations of federal law.

And the FCIC named names, specifying nine top-level executives who should be investigated on criminal charges: CEO Daniel Mudd and CFO Stephen Swad of Fannie Mae; CEO Martin Sullivan and CFO Stephen Bensinger of AIG; CEO Stan O’Neal and CFO Jeffrey Edwards of Merrill Lynch; and CEO Chuck Prince, CFO Gary Crittenden, and Board Chairman Robert Rubin of Citigroup.

None of the 14 financial firms listed in the referrals were criminally indicted or brought to trial, Warren writes. Only five of the 14 even paid fines in civil settlements. None of the nine named individuals were criminally prosecuted, and only one — Crittenden, of Citigroup — had to pay so much as a personal fine, for a mere $100,000.

Fannie Mae’s Daniel Mudd recently reached a civil settlement with the Securities and Exchange Commission that imposed a fine of $100,000, but allowed Fannie Mae to pay it, rather than Mudd. It’s not clear whether the others were even investigated. In March, Fortune magazine reported that Rubin “was never contacted by the Justice Department in relation to the commission’s allegations.”

“Not every individual or company accused of a crime is guilty of that crime and not every DOJ referral results in a conviction,” Warren writes in her letter to the inspector general. “But the DOJ’s failure to obtain any criminal convictions of any of the individuals or corporations named in the FCIC referrals suggests that the department has failed to hold the individuals and companies most responsible for the financial crisis and the Great Recession accountable. This failure requires an explanation.”

Warren has at least one ally on the House side. Just last week, Rep. Bill Pascrell, D-N.J., asked the FBI to publicly release case files relating to crisis-era investigations.

She also has support from Phil Angelides, the chair of the Financial Crisis Inquiry Commission. “There’s a gnawing feeling among the American people that this justice system may not have worked as it should have,” Angelides said in an interview with The Intercept. “Sen. Warren is right on and Americans have a right to know.”

Angelides said “I know as little as you know” about the criminal referrals he sent to the Justice Department. He stressed that it’s not too late to prosecute on some activities, where the 10-year statute of limitations doesn’t run out until 2017. But if nothing happens, he believes that financial institutions will internalize the message that they can continue to violate the law with impunity.

“It’s like someone who robs a 7-11. If you can steal $1,000 and settle for $20 would you do it again? Probably.”

Read Warren’s letter to Horowitz, which includes information on the specific criminal referrals:

EMBARGOED-Warren-DOJ-IG-FCIC-Letter20 pages

Read Warren’s letter to Comey:

EMBARGOED-Warren-FBI-FCIC-Letter3 pages


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