Seven Day Plan to Hold Wall Street Accountable

A Seven Day Plan to Finally Hold Wall Street Accountable
New evidence points to illegal behavior. Prosecution is the only way to keep that behavior from continuing.
Bruce Judson
Monday, 03/19/2012
http://www.newdeal20.org/2012/03/19/a-seven-day-plan-to-finally-hold-wall-street-accountable-74581

It’s now a near certainty that Wall Street executives committed felonies.

The recently released audits of robo-mortgage activities by the Office of the Inspector General of the Department of Housing and Urban Development (HUD) details shocking behavior at the five banks constituting the Federal Housing Administration’s largest mortgage servicers. At Wells Fargo, management quashed a midlevel manager’s study of the foreclosure process as negative results began to emerge, and it gave an individual whose last job had been in a pizza restaurant the title of “vice-president of loan documentation” to facilitate robo-mortgage signing. Bank of America evaluated employees on the volume of foreclosure affidavits produced. JP Morgan Chase gave individuals titles such as “vice-president of Chase Home” where “the titles were given by Chase for the sole purpose of allowing individuals to sign documents and came with no other duties or authority.” Citigroup and Ally similarly engaged in seemingly illegal practices.

Under federal law, the knowing filing of a false affidavit with the court is a felony offense of perjury, punishable by a prison term of up to five years. An individual violates laws against perjury whether he or she personally appears in court and swears to a false statement or provides the court with a false affidavit. Individual states have their own perjury laws, which were undoubtedly violated as well. The HUD report also suggests that individual banks may be guilty of obstruction of justice and the criminal violation of the False Claims Act for filing insurance claims without following HUD requirements.

Since the start of the financial crisis, federal and state officials have been struggling to change Wall Street behavior. To date, every effort has failed miserably, and the weak enforcement provisions of the robo-mortgage settlement are unlikely to meaningfully change this dynamic. Government officials have also relied, with a very few exceptions, entirely on civil enforcement when criminal laws appear to have been egregiously violated.

The greatest moral hazard now confronting the nation is what appears to be increasingly brazen criminal activity by financial industry executives. With each decision not to prosecute, Wall Street executives justifiably conclude that they are immune to the rules. As a result, it appears that Wall Street criminal activity is increasing in frequency and severity, as opposed to the reverse. The activities surrounding the collapse of MF Global are one example.

So what can be done about it? We can change the behavior in the financial service industry for a full generation in just seven days. This plan may seem to be tongue and cheek, but it hearkens back to a similar action in the era of the Great Depression. In the final months of Herbert Hoover’s presidency, the Senate Banking Committee began an investigation into the causes of the Great Crash of 1929, and a young prosecutor named Ferdinand Pecora was appointed as Chief Counsel. Subsequently, the Roosevelt administration conveyed to Pecora that “the prosecution of an outstanding violator of the banking law would be the most salutary action that could be taken at this time. The feeling is that if the people become convinced that the big violators are to be punished, it will be helpful in restoring confidence.” Ultimately, this investigation, which came to be known as the Pecora Commission, led to the indictment of one of America’s most prominent financiers; demonstrated widespread self-dealing in the financial sector; and, as noted by historian Alan Brinkley, generated “broad popular support” for Roosevelt’s reform agenda, including the creation of the SEC and the Glass-Steagall Act.

My seven day plan is based on a simple premise: When criminal laws are egregiously violated, the guilty parties should face appropriate punishment. Here’s the plan:

Day One: Read the HUD Inspector General’s reports and the public records of past mortgage foreclosure cases from across the nation.

Day Two: Meet with the team at the Office of the Inspector General at HUD that prepared the audits. Obtain the names of all the bank officials, lawyers, and notaries whose behavior, as cited in the audit reports or otherwise known to the investigators, represent clear and unquestionable criminal violations. Add to this list other individuals who have similarly demonstrated or testified to behavior unquestionably constituting criminal acts, as indicated by the public records of the mortgage foreclosure cases reviewed in day one.

Day Three: Indict all of the individuals on the list compiled on day two.

Day Four: Indict banks and financial institutions on criminal charges where criminal behavior by employees (as demonstrated by day three indictments) appears to be endemic. The Justice Department guidelines for prosecuting firms include: (1) the pervasiveness of such activity, (2) the compliance procedures in place, (3) attempts by the corporation to end bad behavior, and (4) cooperation with federal investigators. In 2008, the Justice Department adopted a policy of accepting “deferred prosecutions,” involving agreements to change corporate behavior without damaging innocent third parties through prosecution.

Corporations receive the benefits of “legal persons,” as demonstrated by Citizens United. But they must also bear the responsibilities of these privileges. A reading of the HUD reports, and other public records, suggests several banks should clearly be prosecuted.

Day 5: Discuss plea bargains with indicted lower-level officials in return for cooperating in investigations of higher-level officials.

Day 6: Consider plea bargains with indicted banks, which require the removal of all remaining officers and directors who were serving when egregious criminal activity occurred, as well as senior officials who were in a position to exercise appropriate supervisory responsibility but chose to look the other way.

Day 7: Indict any senior Wall Street officials implicated by new cooperative testimony resulting from activities on day five. Adopt and announce a policy that future criminal violations will be prosecuted in a similar fashion.

What is particularly disturbing is that a look at the evidence already in the public domain (much less what investigators already know) shows that none of the actions discussed above are entirely absurd. The purpose of prosecution not simply punishment. It acts to deter further illegal activity and to restore public confidence in our system of governance. The nation desperately needs both of these benefits today.

Moreover, these ongoing, almost certainly criminal activities are ultimately dangerous threats to our economy, the success of capitalism, and our democracy. In his column on MF Global, Joe Nocera noted that “customers need to be able to trust” the laws protecting their money. “Otherwise, the markets can’t function.”

Today, as in the era of FDR, we must send a message to the financial community that illegal behavior will not be tolerated. By prosecuting blatant felonies now, we will deter future misbehavior and begin the process of recreating a fair society where equal justice prevails.

Bruce Judson is Entrepreneur-in-Residence at the Yale Entrepreneurial Institute and a former Senior Faculty Fellow at the Yale School of Management.

Big Banks Plead with Customers Not to Move Their Money

November 9, 2011
http://www.washingtonsblog.com/2011/11/big-banks-plead-with-customers-not-to-move-their-money.html

Yes, The Big Banks DO Care If We Move Our Money
650,000 customers moved $4.5 billion dollars out of the big banks and into smaller banks and credit unions in the last month.

But there is a myth making the rounds that the big banks don’t really care if we move our money. For example, one line of reasoning is that no matter how many people move their money, the Fed and Treasury will just bail out the giants again.

But many anecdotes show that the too big to fails do, in fact, care.

Initially, of course, if the big banks really didn’t care, they wouldn’t have prevented protesters from closing their accounts.

NBC notes that – in response to inquiries regarding how many people have moved their money – Bank of America refused to provide figures, and instead sent the following defensive email:

“Bank of America continues to be a great place for customers to manage their everyday finances and achieve their savings goals,” [Colleen Haggerty, a spokeswoman for Bank of America's Southern California operations] said in an email. “We offer customers more choice and convenience, including industry-leading fraud protection, access to thousands of banking centers and ATMs, and the best online and mobile banking, which allow customers to bank on their terms 24/7.”

A writer noted at Daily Kos:

At Wells Fargo, my sister walked up to the teller and politely asked to close her account. The teller said, “No problem.” She pulled up her account and saw the balance and told her that due to the amount she had to speak with the branch manager. The branch manager came out. He was probably 30 years old and was very arrogant. He asked my sister why she wanted to close her account and my sister told him she thought Wells Fargo was part of the problem with the economy. He went thru some talking points about why she shouldn’t move her money, but my sister didn’t back down. When he asked her where she was going she told him that she would be banking at the North Carolina State Employees Credit Union. She isn’t a state employee, but anyone can join if you are related to a state employee. It turns out her husband is. Anyway, the bankster told her “You’ll be back. Credit unions can’t provide the services you need.” We’ll see about that. She withdrew over $200k from Wells Fargo.

Next we went to Bank of America. I closed my last account with hardly any questions asked. Of course, I had taken most of my money out so there wasn’t much left to take. My sister on the other hand had a large balance in multiple accounts. They actually refused to cut her a check for the full amounts. They only gave her 1/3 of her money and told her she’d have to come back to withdraw the rest. They claimed they were only allowed to make checks for a certain amount, and that they had no authority to cut additional checks on the same day. Stupid BofA. She had her check in hand and politely told off the branch manager when he told her she had to come back another day or two to withdraw the rest.

At BofA, we weren’t the only ones closing accounts. There was a line of people. Most had small accounts because they weren’t even being challenged, but she actually had to wait in line to speak with a branch manager.

At SunTrust, the branch manager went off his rocker. He just kept asking her “is there anything I can do or anything I can say to change your mind?” He asked probably twenty times. He even offered to have the market executive meet with her and hear out her concerns. She told him she wasn’t interested. He really looked nervous about it.


And a writer at Daily Bail pointed out:

I went in, asked to speak with a banker and was seated in an office. When the young associate came in and asked the purpose of my visit, I handed her my ATM card and requested that she tell me the balance. When she did, I then asked for a cashiers check in that amount. That’s when things got wonky. She froze, stumbled over her words and asked why I needed that amount (It was not a small sum). This gave me an opportunity to explain that although I personally would not be affected by their new fees I know plenty of friends and family that would feel the pain. In solidarity with them, I wished to close the account and move on. She unwittingly suggested that if I just use my debit card once a month then there would be no fee. That was good for a belly laugh from me, then I again requested the balance to be issued to me in the form of a cashier’s check. She then told me that there would be a $10 fee for this service. Another laugh. I guess it didn’t sink in when I told her that I was fee adverse. There was an easy work-around anyway – I requested the cash. That finished my time with this associate banker as the amount I was requesting was “well past” her daily limit for withdrawals. I asked if there would be an issue with securing the cash and she said “I honestly don’t know if we have that here” and walked out to get the branch manager.

The manager was pleasant enough and very direct. After introducing herself she flat out asked “What can we do to change your mind?” “We don’t want to see you go” she emphasized. This opened a door for me to further explain my decision to leave the bank and why I was doing it. Amazingly, it did not fall on deaf ears. She indicated that understood where I was coming from and actually showed genuine surprise at some of the facts I provided her about the less than consumer friendly policies and machinations of her employer. She did make some feeble counter-arguments and repeatedly asked me if I would change my mind (with a hint of desperation!). I stood firm and by the end of our conversation she asked if I would be willing to put it all in writing so she could send it up the chain.

She shared that management is nervous, they are seeing money leaking out of the bank and realize that they have made mistakes…. They are also aware of the growing momentum behind the November 5th move your money movement.


Management is aware that people are angry (how could they not be!) and have put an ear to the ground.

Hundreds of similar stories are being told all over America.

Even though the government may keep throwing money at the dinosaurs, the Basel regulations do have some capital requirements, and so the big banks need to bring in some actual deposits to fund their casino gambling.

Moreover, if too many depositors leave, the illusion that the big banks are serving the American public will be burst, and a critical mass of consciousness will occur, so that the banks’ questioned control over the American political and financial systems will start to be questioned.

So moving our money is an effective step towards reclaiming America.

Foreclosure firm has Halloween party dressed as depressed homeowners

Andrew Jones
Saturday, October 29, 2011
http://www.rawstory.com/rs/2011/10/29/foreclosure-firm-has-halloween-party-dressed-as-sad-homeowners

Based on their Halloween costumes from last year, it would not be surprising if employees from foreclosure firm giant Steven J. Baum dressed up this year as homeowners who’ve lost their property thanks to firms like them.

In a column from The New York Times Joe Nocera, a former employee of the Baum firm revealed that his former co-workers did indeed dress as downtrodden individuals with signs representing their depressed state. The ex-Baum employee, who Nocera kept anonymous, told the Times reporter that she wanted to show how the firm had a “cavalier attitude” towards foreclosing people’s homes.

After getting word of Nocera’s story, the firm vehemently defended itself, saying the column was “another attempt by The New York Times to attack our firm and our work.”

The Baum firm represents virtually all the prominent mortgage lending Wall Street giants, including Citigroup, JPMorgan Chase, Bank of America and Wells Fargo.

Newsflash: Banks Out to Screw Customers

From the NYT:

Bank of America, the nation’s biggest bank, said on Thursday that it planned to start charging customers a $5 monthly fee when they used their debit cards for purchases. It was just one of several new charges expected to hit consumers as new regulations crimp banks’ profits.

Wells Fargo and Chase are testing $3 monthly debit card fees. Regions Financial, based in Birmingham, Ala., plans to start charging a $4 fee next month, while SunTrust, another regional powerhouse, is charging a $5 fee.

The round of new charges stems from a rule, which takes effect on Saturday, that limits the fees that banks can levy on merchants every time a consumer uses a debit card to make a purchase. The rule, known as the Durbin amendment, after its sponsor Senator Richard J. Durbin, is a crucial part of the Dodd-Frank financial overhaul law.

Until now, the fees have been 44 cents a transaction, on average. The Federal Reserve in June agreed to cut the fees to a maximum of about 24 cents. While the fee amounts to pennies per swipe, it rapidly adds up across millions of transactions. The new limit is expected to cost the banks about $6.6 billion in revenue a year, beginning in 2012, according to Javelin Strategy and Research. That comes on top of another loss, of $5.6 billion, from new rules restricting overdraft fees, which went into effect in July 2010.

And even though retailer groups had argued that lower fees were important to keep prices in check, consumers were not likely to see substantial savings. In fact, they are simply going to end up paying from a different pot of money.

Or as Jamie Dimon, chief executive of JPMorgan Chase, put it after passage last year of the Dodd-Frank Act, “If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger.”

Chase is now charging customers for a paper statement. It also, like many other banks, scrapped its debit card rewards program. And customers that Chase inherited from Washington Mutual no longer enjoy free checking accounts.

The bank is also exploring a number of other fee increases, including for online banking, according to people with knowledge of the matter.

Bank of America’s debit fee is steeper than most of its competitors’, reflecting the broader challenges the bank is facing after the financial crisis. The bank has introduced an online-only account that charges customers for doing business at a local branch. It also plans to apply its new debit card fees to anyone who uses the card to make recurring payments like gym fees or cable bills.

Citibank is one of the few that said it would not introduce a charge for debit card use. “We have talked to customers and they have made it abundantly clear that ‘if you charge me to use my debit card, I would find that very irritating,’ ” said Stephen Troutner, head of Citi’s banking products. Still, the bank has made it more difficult to qualify for free checking, among other moves.

Earlier this year, Wells Fargo estimated that the Durbin rules would cost the bank $250 million in revenue every quarter. It hopes to make up half that gap with a variety of new products and customer fees, including the monthly debit card fee of $3. The change is part of a “pilot program” the bank will begin on Oct. 14 in five states across the country, including Washington and Georgia. As of Saturday, the bank will discontinue its debit card rewards program.

Meanwhile, HSBC said that it recently increased an A.T.M. fee — to $2.50 from $2 — for certain customers when they used a competitor’s A.T.M. It also recently introduced a debit transaction fee of 35 cents, though the first eight transactions are free.

And at TDBank, customers will now have to pay $2 for using A.T.M.’s outside their network.

“Durbin essentially moves the cost of debit away from merchants, and now it’s more focused on consumers,” said Beth Robertson, director of payments research at Javelin. “There are all sort of things happening where banks are saying, where can we put fees in place for our service to generate revenue or how can we reduce our costs?”

Over the last few years, consumers have increasingly shifted their spending to debit cards from credit cards, in large part to curb their spending. But some analysts predicted that the new fees could prompt consumers to return to credit cards — a more lucrative alternative for the banks...

Banks to Make Customers Pay Fee for Using Debit Cards
TARA SIEGEL BERNARD and BEN PROTESS
September 29, 2011
http://www.nytimes.com/2011/09/30/business/banks-to-make-customers-pay-debit-card-fee.html

Illegal Foreclosure Epidemic

Robo-signing foreclosure paperwork is a federal crime, but no bank or banker has even been charged.
Jim Hightower
August 15, 2011
http://www.otherwords.org/articles/illegal_foreclosure_epidemic

Two-year-olds often go running around the house too wildly and crash into something. They get an "ouchie" and fall down crying, but they learn from it.

That's the virtue of the "ouchie" that Bank of America, Goldman Sachs, JPMorgan Chase, Wells Fargo, and other big financiers got last year when they ran into the law after racing wildly through home foreclosure paperwork. They were caught falsifying thousands of documents and taking illegal shortcuts that were causing innocent families to lose their homes. They had to pay fines, make restitution, suspend foreclosures, and pledge to clean up their act. But at least they learned their lesson.

Oh, wait — these aren't two-year-olds. They are wily bankers, and the only lesson they ever seem to learn is that shortcuts can be profitable — as long as you don't get caught. But once again they've been caught rushing through foreclosures, using the same old scam called "robo-signing."

To foreclose on someone's home, an authorized bank employee must sign the foreclosure document, swearing that the facts in it are true. But that requires hiring people to review each case. To avoid that cost, they take an illegal shortcut by signing the name of someone who has not read the document and might not even exist.

In one Massachusetts county, for example, the signature of "Linda Green" has recently appeared on some 1,300 foreclosures. Curiously, her signature was written in many different styles, and she had many different titles. Also, there's no Linda Green presently working in the mortgage banking company involved. Meanwhile, state officials say that robo-signing is, once again, "an epidemic" all across the country.

It's a federal crime to do this, yet no bank or banker has even been charged. Until we put a CEO in jail, the banking barons will never learn their lesson.

Jim Hightower is a radio commentator, writer, and public speaker. He's also editor of the populist newsletter, The Hightower Lowdown.

Homeowners Bring Sheriff's Deputies To BofA To Collect Unpaid Debt

Homeowners Bring Sheriff's Deputies To Bank Of America Branch To Collect Unpaid Debt

Chris Morran on June 3, 2011
http://consumerist.com/2011/06/bank-of-america-customers-show-up-with-sheriff-to-collect-debt-from-bank.html

Earlier today, in a move not terribly dissimilar to the Philadelphia homeowner who attempted to "foreclose" on Wells Fargo, a Florida couple showed up at a Bank of America branch with two sheriff's deputies, ready to claim office assets to satisfy an unpaid debt.

The couple had been the defendants in a foreclosure lawsuit filed by BofA, at least until the bank realized it had made a mistake and dropped the suit. That's when the couple began the Sisyphean ordeal of trying to recoup the $2,534 in legal fees they were owed by the bank.

They tell News-Press.com that they made numerous attempts to contact the bank, even sending a registered letter to BofA's general counsel. When all that failed, it was time to bring in the sheriff.

"I don't know of any other way way we could have done it," their lawyer says.

Before the deputies could get around to claiming the bank's furniture for the couple, the branch manager interceded and claims to have cut a check that satisfies the debt.

A Real Jaw Dropper at the Federal Reserve

http://www.huffingtonpost.com/rep-bernie-sanders/a-real-jaw-dropper-at-the_b_791091.html

Sen. Bernie Sanders
Independent U.S. Senator from Vermont
December 2, 2010
A Real Jaw Dropper at the Federal Reserve

At a Senate Budget Committee hearing in 2009, I asked Fed Chairman Ben Bernanke to tell the American people the names of the financial institutions that received an unprecedented backdoor bailout from the Federal Reserve, how much they received, and the exact terms of this assistance. He refused. A year and a half later, as a result of an amendment that I was able to include in the Wall Street reform bill, we have begun to lift the veil of secrecy at the Fed, and the American people now have this information.

It is unfortunate that it took this long, and it is a shame that the biggest banks in America and Mr. Bernanke fought to keep this secret from the American public every step of the way. But, the details on this bailout are now on the Federal Reserve's website, and this is a major victory for the American taxpayer and for transparency in government.

Importantly, my amendment also required the Government Accountability Office to conduct a top-to-bottom audit of all of the emergency lending the Fed provided during the financial crisis to be completed on July 21, 2011, which will take a hard look at all of the potential conflicts of interest that took place with respect to this bailout. So, in many respects, details that the Fed was forced to divulge on Wednesday about the $3.3 trillion in emergency loans that until now were totally kept from public scrutiny, marked the beginning, not the end, of lifting the veil of secrecy at the Fed.

After years of stonewalling by the Fed, the American people are finally learning the incredible and jaw-dropping details of the Fed's multi-trillion-dollar bailout of Wall Street and corporate America. As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions and how we can make our financial institutions more responsive to the needs of ordinary Americans and small businesses.

What have we learned so far from the disclosure of more than 21,000 transactions? We have learned that the $700 billion Wall Street bailout signed into law by President George W. Bush turned out to be pocket change compared to the trillions and trillions of dollars in near-zero interest loans and other financial arrangements the Federal Reserve doled out to every major financial institution in this country. Among those are Goldman Sachs, which received nearly $600 billion; Morgan Stanley, which received nearly $2 trillion; Citigroup, which received $1.8 trillion; Bear Stearns, which received nearly $1 trillion, and Merrill Lynch, which received some $1.5 trillion in short term loans from the Fed.

We also learned that the Fed's multi-trillion bailout was not limited to Wall Street and big banks, but that some of the largest corporations in this country also received a very substantial bailout. Among those are General Electric, McDonald's, Caterpillar, Harley Davidson, Toyota and Verizon.

Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations including two European megabanks -- Deutsche Bank and Credit Suisse -- which were the largest beneficiaries of the Fed's purchase of mortgage-backed securities.

Deutsche Bank, a German lender, sold the Fed more than $290 billion worth of mortgage securities. Credit Suisse, a Swiss bank, sold the Fed more than $287 billion in mortgage bonds.

Has the Federal Reserve of the United States become the central bank of the world?

The Fed said that this bailout was necessary to prevent the world economy from going over a cliff. But three years after the start of the recession, millions of Americans remain unemployed and have lost their homes, life savings and ability to send their kids to college. Meanwhile, big banks and corporations have returned to making huge profits and paying their executives record-breaking compensation packages as if the financial crisis they started never happened.

What this disclosure tells us, among many other things, is that despite this huge taxpayer bailout, the Fed did not make the appropriate demands on these institutions necessary to rebuild our economy and protect the needs of ordinary Americans.

For example, at a time when big banks have nearly a trillion dollars in excess reserves parked at the Fed, the Fed did not require these institutions to increase lending to small- and medium-sized businesses as a condition of the bailout.

At a time when large corporations are more profitable than ever, the Fed did not demand that corporations that received this backdoor bailout create jobs and expand the economy once they returned to profitability.

I intend to investigate whether these secret Fed loans, in some cases, turned out to be direct corporate welfare to big banks that used these loans not to reinvest in the economy but rather to lend back to the federal government at a higher rate of interest by purchasing Treasury Securities. Instead of using this money to reinvest in the productive economy, I suspect a large portion of these near-zero interest loans were used to buy Treasury Securities at a higher interest rate providing free money to some of the largest financial institutions in this country. That is something that we have got to closely examine.

At a time when Wall Street executives are now making more money than before the financial crisis, how many big banks that paid back TARP funds in 2009 to avoid limits on executive compensation received no-strings-attached loans from the Federal Reserve?

At a time when millions of Americans are paying outrageously high credit card interest rates, why didn't the Fed require credit card issuers to lower interest rates as a condition of the bailout?

The four largest banks in this country (Bank of America, JP Morgan Chase, Wells Fargo, and Citigroup) issue half of all mortgages in this country. We now know that these banks received hundreds of billions from the Fed. How many Americans could have remained in their homes, if the Fed required these bailed-out banks to reduce mortgage payments as a condition of receiving these secret loans?

We have begun to lift the veil of secrecy at one of most important agencies in our government. What we are seeing is the incredible power of a small number of people who have incredible conflicts of interest getting incredible help from the taxpayers of this country while ignoring the needs of the people.

Homeowners' Rebellion: Could 62 Million Homes Be Foreclosure-Proof?

http://www.commondreams.org/headline/2010/08/18-8
Wednesday, August 18, 2010 by YES! Magazine
Homeowners' Rebellion: Could 62 Million Homes Be Foreclosure-Proof?
A committed movement to tear off the predatory mask called MERS could yet turn the tide for struggling homeowners.
by Ellen Brown

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles—and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere "nominee"-an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff's legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear-while the financial industry could end up skewered on its own sword.

California Precedent

The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E-11. The court held that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:

Since no evidence of MERS' ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.

In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the "Boyko" decision from Ohio Federal Court). (For more on these earlier cases, see here, here and here.) The court concluded:

Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.

The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:

This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee's Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.

While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.

What Could This Mean for Homeowners?

Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS' technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.

An August 2010 article in Mother Jones titled "Fannie and Freddie's Foreclosure Barons" exposes a widespread practice of "foreclosure mills" in backdating assignments after foreclosures have been filed. Not only is this perjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.

In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders' case in 2004. Five years later, she says, some of the homeowners she's helped are still in their homes. According to a Huffington Post article titled "‘Produce the Note' Movement Helps Stall Foreclosures":

Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action ‘quiets' all other claims). Charney says she's helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.

Criminal Charges?

Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used "the artifice of MERS to sabotage the judicial process to the detriment of borrowers;" that "to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;" that the scheme depended on "the MERS artifice and the ability to generate any necessary ‘assignment' which flowed from it;" and that "by engaging in a pattern of racketeering activity, specifically ‘mail or wire fraud,' the Defendants . . . participated in a criminal enterprise affecting interstate commerce."

Local governments deprived of filing fees may also be getting into the act, at least through representatives suing on their behalf. Qui tam actions allow for a private party or "whistle blower" to bring suit on behalf of the government for a past or present fraud on it. In State of California ex rel. Barrett R. Bates, filed May 10, 2010, the plaintiff qui tam sued on behalf of a long list of local governments in California against MERS and a number of lenders, including Bank of America, JPMorgan Chase and Wells Fargo, for "wrongfully bypass[ing] the counties' recording requirements; divest[ing] the borrowers of the right to know who owned the promissory note . . .; and record[ing] false documents to initiate and pursue non-judicial foreclosures, and to otherwise decrease or avoid payment of fees to the Counties and the Cities where the real estate is located." The complaint notes that "MERS claims to have ‘saved' at least $2.4 billion dollars in recording costs," meaning it has helped avoid billions of dollars in fees otherwise accruing to local governments. The plaintiff sues for treble damages for all recording fees not paid during the past ten years, and for civil penalties of between $5,000 and $10,000 for each unpaid or underpaid recording fee and each false document recorded during that period, potentially a hefty sum. Similar suits have been filed by the same plaintiff qui tam in Nevada and Tennessee.

By Their Own Sword: MERS' Role in the Financial Crisis

MERS is, according to its website, "an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans." Or as Karl Denninger puts it, "MERS' own website claims that it exists for the purpose of circumventing assignments and documenting ownership!"

MERS was developed in the early 1990s by a number of financial entities, including Bank of America, Countrywide, Fannie Mae, and Freddie Mac, allegedly to allow consumers to pay less for mortgage loans. That did not actually happen, but what MERS did allow was the securitization and shuffling around of mortgages behind a veil of anonymity. The result was not only to cheat local governments out of their recording fees but to defeat the purpose of the recording laws, which was to guarantee purchasers clean title. Worse, MERS facilitated an explosion of predatory lending in which lenders could not be held to account because they could not be identified, either by the preyed-upon borrowers or by the investors seduced into buying bundles of worthless mortgages. As alleged in a Nevada class action called Lopez vs. Executive Trustee Services, et al.:

Before MERS, it would not have been possible for mortgages with no market value . . . to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder's office where documents reflecting any ownership interest in real property are kept....

After MERS, . . . the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible .... The servicer was interested in only one thing - making a profit from the foreclosure of the borrower's residence - so that the entire predatory cycle of fraudulent origination, resale, and securitization of yet another predatory loan could occur again. This is the legacy of MERS, and the entire scheme was predicated upon the fraudulent designation of MERS as the ‘beneficiary' under millions of deeds of trust in Nevada and other states.

Axing the Bankers' Money Tree

If courts overwhelmed with foreclosures decide to take up the cause, the result could be millions of struggling homeowners with the banks off their backs, and millions of homes no longer on the books of some too-big-to-fail banks. Without those assets, the banks could again be looking at bankruptcy. As was pointed out in a San Francisco Chronicle article by attorney Sean Olender following the October 2007 Boyko [pdf] decision:

The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

. . . The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail . . . .

Nationalization of these giant banks might be the next logical step-a step that some commentators said should have been taken in the first place. When the banking system of Sweden collapsed following a housing bubble in the 1990s, nationalization of the banks worked out very well for that country.

The Swedish banks were largely privatized again when they got back on their feet, but it might be a good idea to keep some banks as publicly-owned entities, on the model of the Commonwealth Bank of Australia. For most of the 20th century it served as a "people's bank," making low interest loans to consumers and businesses through branches all over the country.

With the strengthened position of Wall Street following the 2008 bailout and the tepid 2010 banking reform bill, the U.S. is far from nationalizing its mega-banks now. But a committed homeowner movement to tear off the predatory mask called MERS could yet turn the tide. While courts are not likely to let 62 million homeowners off scot free, the defect in title created by MERS could give them significant new leverage at the bargaining table.

Ellen Brown wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Ellen developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she shows how the Federal Reserve and "the money trust" have usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are webofdebt.com, ellenbrown.com, and public-banking.com.

Financial Regulation & Regulatory Capture

http://www.pbs.org/moyers/journal/blog/2010/04/financial_regulation_regulator.html

Financial Regulation & Regulatory Capture
Simon Johnson and James Kwak
April 16, 2010

The White House and Democrats in Congress have begun pushing in earnest for a package of financial reforms. But will it be enough to stop Wall Street from causing another meltdown?

To find out what real financial reform needs to look like, Bill Moyers turns to Simon Johnson and James Kwak, the co-authors of 13 BANKERS: THE WALL STREET TAKEOVER AND THE NEXT FINANCIAL MELTDOWN.

The problem, according to Kwak, is that the legislation currently doesn't address the central problem of the crisis, that America's banks have grown 'too big to fail.' In fact, the problem has gotten worse, with just six banks holding assets in excess of 63% of the U.S. Gross Domestic Product. Kwak explains that the crisis actually made the surviving banks more powerful, "I think what's remarkable is that it used to be maybe eight or nine banks. But what's happened over the last two years, as Simon is saying, is that these banks have gotten bigger, because they've bought each other. They've become more powerful. And they have an even stronger market position in some key markets like credit cards, mortgages, equity underwriting, and derivatives."

Johnson argues that for reform to work, policy makers and regulators must reject the belief that Wall Street knows what's its doing, that its interests are always aligned with the nation as a whole, "The idea that we need Wall Street with its current structure — and a disproportionate economic power that implies — to somehow make this economy work and drive entrepreneurship, that idea is nonsense. This is why we wrote the book, all right? There's plenty of evidence on this issue. We go through it. If you want a faith based economy in this regard, you can disregard the evidence."

Senator Brown and the 'Volcker Rule'

Johnson and Kwak believe Congress should pass a law capping the size of the banks, to keep them from becoming so large that their failure threatens the world economy. This approach has been dubbed the 'Volcker Rule,' after Paul Volcker, the well-respected former Federal Reserve chairman who has pushed hard for its inclusion. Senator Sherrod Brown from Ohio has introduced an amendment to the bill that would do just that, reading in part that, "No bank holding company may possess non-deposit liabilities exceeding 3 percent of the annual gross domestic product of the United States."

The Six Big Banks

The names of the six banking behemoths are no doubt familiar to most Americans. The four largest by assets — Bank of America, JPMorgan Chase, Wells Fargo and Citigroup — hold 39 percent of American's deposits.

The six biggest commercial banks by deposit:
Bank of America, $817.9 billion
JPMorgan Chase Bank $618.1 billion
Wachovia Bank $394.2 billion
Wells Fargo Bank $325.4 billion
Citibank $265.9 billion
U.S. Bank $151.9 billion
Source: FDIC

James Kwak

James Kwak is the co-author, along with Simon Johnson, of 13 BANKERS: THE WALL STREET TAKEOVER AND THE NEXT FINANCIAL MELTDOWN, and the co-founder/co-author of THE BASELINE SCENARIO. Kwak is currently a student at the Yale Law School. Previously, he was a management consultant at McKinsey and Company and co-founder of a successful software company. Kwak received an A.B. in Social Studies from Harvard College and an M.A. and a Ph.D. in History from the University of California, Berkeley.

Simon Johnson

Simon Johnson is the Ronald A. Kurtz (1954) Professor of Entrepreneurship at MIT's Sloan School of Management, a position he has held since 2004. He is also a senior fellow at the Peterson Institute for International Economics in Washington, D.C., and co-founder of a Web site on the global economic and financial crisis, THE BASELINE SCENARIO and "The Hearing," a new economics blog at washingtonpost.com. He is co-director of the NBER project on Africa and President of the Association for Comparative Economic Studies (term of office 2008-09). He is also a contributing editor at the HUFFINGTON POST.

From March 2007 through the end of August 2008, Professor Johnson was the International Monetary Fund's economic counsellor (chief economist) and director of its research department. At the IMF, Professor Johnson led the global economic outlook team, helped formulate innovative responses to worldwide financial turmoil, and was among the earliest to propose new forms of engagement for sovereign wealth funds. He was also the first IMF chief economist to have a blog.

In 2000-2001 Professor Johnson was a member of the US Securities and Exchange Commissions Advisory Committee on Market Information. His assessment of the need for continuing strong market regulation is published as part of the final report from that committee.

Johnson is an expert on financial and economic crises. As an academic, in policy roles, and with the private sector, over the past 20 years he has worked on crisis prevention, amelioration, and recovery around the world, in both relatively rich and relatively poor countries. His work focuses on how policymakers can limit the impact of negative shocks and manage the risks faced by their countries.

Johnson has worked with most of the leading research organizations focused on global economic stability. He remains a Research Associate at the NBER, a CEPR Research Fellow, a BREAD affiliate, a member of the Advisory Group at the Center for Global Development (CGD) in Washington D.C., a member of the International Advisory Board of CASE in Warsaw, and a non-resident Research Fellow at the Asian Institute for Corporate Governance of Korea University. In 2006-07, he was a Visiting Fellow at the Peterson Institute for International Economics in Washington, D.C.

Recent papers have appeared or are forthcoming in THE AMERICAN ECONOMIC REVIEW, THE JOURNAL OF POLITICAL ECONOMY, THE QUARTERLY JOURNAL OF ECONOMICS, THE JOURNAL OF FINANCIAL ECONOMICS, and THE JOURNAL OF FINANCE. He is on the editorial board of THE JOURNAL OF FINANCIAL ECONOMICS, THE REVIEW OF ECONOMICS AND STATISTICS, THE JOURNAL OF COMPARATIVE ECONOMICS, and CLIOMETRICA (a new journal of historical economics and econometric history).

His Ph.D. is in economics from MIT, while his M.A. is from the University of Manchester and his B.A. is from the University of Oxford.

Move Your Money: A New Year's Resolution

http://www.huffingtonpost.com/arianna-huffington/move-your-money-a-new-yea_b_406022.html

Arianna Huffington and Rob Johnson
December 29, 2009
Move Your Money: A New Year's Resolution

Too-big-to-fail banks are profiting from bailout dollars and government guarantees, and growing bigger. Tell us which community bank you use, and why.

Last week, over a pre-Christmas dinner, the two of us, along with political strategist Alexis McGill, filmmaker/author Eugene Jarecki, and Nick Penniman of the HuffPost Investigative Fund, began talking about the huge, growing chasm between the fortunes of Wall Street banks and Main Street banks, and started discussing what concrete steps individuals could take to help create a better financial system. Before long, the conversation turned practical, and with some help from friends in the world of bank analysis, a video and website were produced devoted to a simple idea: Move Your Money.

The big banks on Wall Street, propped up by taxpayer money and government guarantees, have had a record year, making record profits while returning to the highly leveraged activities that brought our economy to the brink of disaster. In a slap in the face to taxpayers, they have also cut back on the money they are lending, even though the need to get credit flowing again was one of the main points used in selling the public the bank bailout. But since April, the Big Four banks -- JP Morgan/Chase, Citibank, Bank of America, and Wells Fargo -- all of which took billions in taxpayer money, have cut lending to businesses by $100 billion.

Meanwhile, America's Main Street community banks -- the vast majority of which avoided the banquet of greed and corruption that created the toxic economic swamp we are still fighting to get ourselves out of -- are struggling. Many of them have closed down (or been taken over by the FDIC) over the last 12 months. The government policy of protecting the Too Big and Politically Connected to Fail is badly hurting the small banks, which are having a much harder time competing in the financial marketplace. As a result, a system which was already dangerously concentrated at the top has only become more so.

We talked about the outrage of big, bailed-out banks turning around and spending millions of dollars on lobbying to gut or kill financial reform -- including "too big to fail" legislation and regulation of the derivatives that played such a huge part in the meltdown. And as we contrasted that with the efforts of local banks to show that you can both be profitable and have a positive impact on the community, an idea took hold: why don't we take our money out of these big banks and put them into community banks? And what, we asked ourselves, would happen if lots of people around America decided to do the same thing? Our money has been used to make the system worse -- what if we used it to make the system better?

Everyone around the table quickly got excited (granted we are an excitable group), and began tossing out suggestions for how to get this idea circulating.

Eugene, the filmmaker among us, remarked that the contrast between the big banks and the community banks we were talking about was very much like the story in the classic Frank Capra film It's a Wonderful Life, where community banker George Bailey helps the people of Bedford Falls escape the grip of the rapacious and predatory banker Mr. Potter.

It was a lightbulb moment. And, unlike the vast majority of dinner conversations, the excitement over this idea didn't end with dessert. It actually led to something -- thanks in great part to Eugene and his remarkable team, who got to work and, in record time, created a brilliant, powerful, and inspiring video playing off the It's a Wonderful Life concept. Watch it below.

Within a few days, the rest of the pieces fell into place, including an agreement with top financial analysts Chris Whalen and Dennis Santiago, who gave us access to their IRA (Institutional Risk Analytics) database. Using this tool, everyone will be able to plug in their zip code and quickly get a list of the small, solvent Main Street banks operating in their community.

The idea is simple: If enough people who have money in one of the big four banks move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it's meant to be. It's neither Left nor Right -- it's populism at its best. Consider it a withdrawal tax on the big banks for the negative service they provide by consistently ignoring the public interest. It's time for Americans to move their money out of these reckless behemoths. And you don't have to worry, there is zero risk: deposit insurance is just as good at small banks -- and unlike the big banks they don't provide the toxic dividend of derivatives trading in a heads-they-win, tails-we-lose fashion.

Think of the message it will send to Wall Street -- and to the White House. That we have had enough of the high-flying, no-limits-casino banking culture that continues to dominate Wall Street and Capitol Hill. That we won't wait on Washington to act, because we know that Washington has, in fact, been a part of the problem from the start. We simply can't count on Congress to fix things. We have to do it ourselves -- and the big banks are the core of the problem. We need to return to the stable, reliable, people-oriented approach of America's community banks.

So watch Eugene's amazing video, then go to www.moveyourmoney.info to learn more about how easy it is to move your money. And pass the idea on to your friends (help make this video -- and this idea -- go viral!).

JP Morgan/Chase, Citi, Wells Fargo, and Bank of America may be "too big to fail" -- but they are not too big to feel the impact of hundreds of thousands of people taking action to change a broken financial and political system. Let them gamble with their own money, not yours. Let's turn big banks into smaller banks. We'll all be better off -- and safer -- as a result.

Make it your New Year's resolution to move your money. We can't think of a better way to start 2010.

Watch:

http://www.youtube.com/watch?v=Icqrx0OimSs

Wells Fargo Will Raise Credit-Card Rates

http://www.bloomberg.com/apps/news?pid=20601087&sid=awlcvwc.dpdM

Wells Fargo Will Raise Credit-Card Rates Ahead of Law
By Peter Eichenbaum
October 7, 2009

(Bloomberg) -- Wells Fargo & Co. plans to raise interest rates on a majority of credit-card customers by 3 percentage points before federal rules limiting such increases take effect, a company executive said.

“This is something we’ve been contemplating for quite a period of time,” Kevin Rhein, group head of card services for the San Francisco-based bank, said today in a telephone interview. “We had just reached the point that we don’t think we can offer credit cards at the current pricing and keep credit flowing.”

Wells Fargo began advising customers this week that the change takes effect on Nov. 30. That’s a day before House Financial Services Committee Chairman Barney Frank wants curbs on rates and fees to become effective under the new U.S. credit- card law. The Massachusetts Democrat plans a hearing tomorrow on moving up the date to Dec. 1 from Feb. 22 to head off increases by card issuers.

Rhein didn’t comment on whether Frank’s bill had a bearing on the timing of Wells Fargo’s rate increases. The bank is also eliminating over-limit fees, which are imposed when customers exceed their credit lines, he said.

Wells Fargo is the eighth-biggest U.S. card lender, Rhein said. The company accepted $25 billion from the government’s bank bailout program.

Bank of America Corp., the second-biggest U.S. credit-card lender after JPMorgan Chase & Co., said in Oct. 5 letters to Frank and Senate Banking Committee Chairman Christopher Dodd that the company wouldn’t raise rates and fees on customers in good standing until the effective dates of the Credit Card Accountability Responsibility and Disclosure Act.

Federal Law

The law, which takes effect in stages, includes provisions that limit rate increases and require lenders to apply payments to higher-rate balances first.

Dodd, a Connecticut Democrat, urged competing card issuers to follow the lead of Charlotte, North Carolina-based Bank of America, the biggest U.S. bank by deposits and assets.

Aides for Frank and Dodd didn’t respond to requests for comment on Wells Fargo’s decision to raise interest rates.

The change doesn’t affect some customers, typically those who signed on within the past year, and others the bank gained from acquiring Wachovia Corp., said spokeswoman Lisa Westermann.

Wells Fargo rose 60 cents, or 2.1 percent, to $29.26 at 4:15 p.m. today in New York Stock Exchange composite trading. The shares have fallen 8.3 percent in the past year.

April Notifications

While Bank of America raised rates on some customers in June, the notifications were sent in April “before we knew the outcome of the final legislation,” spokeswoman Betty Riess said yesterday in an e-mail. Bank of America may raise rates for customers who are late on two or more payments within 12 months, Riess said.

JPMorgan, which raised rates and fees and imposed higher minimum monthly payments after President Barack Obama signed the legislation on May 22, intends to comply with the law’s provisions when they become effective, spokeswoman Stephanie Jacobsen said in an e-mail.

Capital One Financial Corp., the third-biggest issuer of Visa Inc. credit cards, is in “full compliance” with the law, including provisions scheduled to take effect Feb. 22, spokeswoman Tatiana Stead said in an e-mail.

Discover Financial Services customers have been notified of price increases or changes in terms, said Matthew Towson, a spokesman for the Riverwoods, Illinois-based company. Discover has “gone beyond the requirements in some cases including eliminating pay-by-phone fees, over-limit fees and default pricing on existing balances,” he said.

To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net

"The Greatest Boondoggle in History":

http://finance.yahoo.com/tech-ticker/article/244222/%22The-Greatest-Boondoggle-in-History%22-Banks-Buoyed-at-Taxpayers%27-Expense

"The Greatest Boondoggle in History": Banks Buoyed at Taxpayers' Expense
Posted May 08, 2009
by Aaron Task

Bank stocks soared Friday, including Wells Fargo and Morgan Stanley, which sold shares a discounts of more than 10% below Thursday's close.

The ability of banks to raise capital is certainly positive but the idea of shares rallying amid the capital raising and dilution is "counterintuitive," Bank of America CEO Ken Lewis said on CNBC this morning.

BofA shares were also rallying even as the government said it needs to raise an industry-leading $33.9 billion. Citigroup stock was also a big winner after the government's curious declaration that it "only" needs to raise $5 billion.

While much of the focus is on the stress tests and banks' efforts to raise cash, the real story is Geithner's Public-Private Investment Program (PPIP), says William Black, an Associate Professor of Economics and Law at the University of Missouri - Kansas City.

The PPIP is the "greatest boondoggle in the history of the world," says Black, a former bank regulator who was counsel to the Federal Home Loan Bank Board during the S&L crisis. As occurred during the S&L era, Black says the PPIP will allow banks to exchange "trash for cash" and turn "real losses into faulty gains."

If the goal of Tim Geithner and other regulators was "to rip off the American taxpayer for the benefit of the least-deserving wealthiest people you can imagine, well - mission accomplished," Black says.

Banks Agree To Foreclosure Moratoriums

http://money.cnn.com/news/newsfeeds/articles/djf500/200902131828DOWJONESDJONLINE000900_FORTUNE5.htm
Banks Agree To Foreclosure Moratoriums
February 13, 2009
By Meena Thiruvengadam

WASHINGTON -(Dow Jones)- JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) have committed to temporary moratoriums on foreclosures as the government works on a financial stability plan slated to include billions of dollars aimed at keeping people in their homes.

"We will not add to the foreclosure process any new owner-occupied residential loans that are owned and serviced by JPMorgan Chase," the company's chief executive, Jamie Dimon, said in a letter Thursday to Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.

The moratorium on new foreclosure actions will remain in effect through March 6 and is similar to a 90-day foreclosure freeze JPMorgan announced Oct. 31.

"We believe three weeks is adequate time for the Treasury to announce - and for us to implement - a new plan," Dimon said.

Citigroup in a statement issued Friday said it will place a moratorium on foreclosures for all Citi-owned first mortgage loans that are on principal residences and on loans for which understandings with investors have been reached. The moratorium is scheduled to last until March 12 unless the government finalizes a loan-modification program before that date.

Bank of America on Friday said it will delay foreclosure sales on owner- occupied properties whose mortgage loans are owned and serviced by it or Countrywide Financial Corp. through March 6. Bank of America acquired Countrywide in July.

"If the program's development is not complete in three weeks, we will consider a possible extension," a Bank of America spokeswoman said.

Wells Fargo, which recently acquired Wachovia Corp., has imposed a moratorium on foreclosures for loans it holds, company spokesman Kevin Waetke said Friday. That moratorium is expected to remain in place until the government's foreclosure prevention plan is announced.

The majority of Wells Fargo's mortgage loans, however, are serviced by it and owned by other investors. The company is "working with these investors and related contractual commitments to determine how we will support the moratorium request," it said in a statement issued Friday.

Lawmakers in a congressional hearing Wednesday asked the executives of several of the nation's largest banks to institute a moratorium on foreclosures until the details of a revamped government bailout effort are announced. The Office of Thrift Supervision, which regulates U.S. thrifts, on Wednesday also called for institutions it oversees to suspend foreclosures for the next few weeks.

U.S. Treasury Secretary Timothy Geithner on Tuesday unveiled the outlines of the revamped government effort and said details will be released later. Geithner has been meeting with other members of President Barack Obama's economic team and the secretary of housing and urban development to discuss foreclosure prevention.

Obama is scheduled to outline his plan to stem foreclosures next week.

"I am asking you at this time to commit to this committee and to the people across America that you will do something here ... and that is to commit to having a moratorium on all foreclosures that each of your banks and affiliates deal with until the Treasury secretary can put together this package," Rep. David Scott, D-Ga., said at Wednesday's hearing.

Citigroup Chief Executive Vikram Pandit in that hearing first told lawmakers of his company's intent to institute a foreclosure moratorium, saying Citigroup "would commit to making sure that people stay in their houses."

Also in that hearing, Bank of America Chief Executive Ken Lewis indicated his firm would consider freezing its foreclosure activity. "If we could put a time frame on it, ... say it's two weeks or three weeks, we would do that," he told lawmakers.

Some lawmakers have suggested Geithner "strongly encourage" banks receiving government capital through the controversial $700 billion Troubled Asset Relief Program, or TARP, to temporarily stop foreclosures. "TARP-assisted financial institutions should allow struggling homeowners more time to qualify for any systematic loan modification plan," Frank and Rep. Doris Matsui, D-Calif., wrote in a letter to Geithner on Wednesday.

JPMorgan, Citigroup, Bank of America and Wells Fargo each have received billions of dollars in federal aid through TARP.

-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-6629; meena.thiruvengadam@dowjones.com

(Henry J. Pulizzi contributed to this article.)

The “dirty little secret” of the US bank bailout

http://wsws.org/articles/2008/oct2008/pers-o27.shtml

The “dirty little secret” of the US bank bailout
27 October 2008

In an unusually frank article published in Saturday's New York Times, the newspaper's economic columnist, Joe Nocera, reveals what he calls "the dirty little secret of the banking industry"--namely, that "it has no intention of using the [government bailout] money to make new loans."

As Nocera explains, the plan announced October 13 by Treasury Secretary Henry Paulson to hand over $250 billion in taxpayer money to the biggest banks, in exchange for non-voting stock, was never really intended to get them to resume lending to businesses and consumers--the ostensible purpose of the bailout. Its essential aim was to engineer a rapid consolidation of the American banking system by subsidizing a wave of takeovers of smaller financial firms by the most powerful banks.

Nocera cites an employee-only conference call held October 17 by a top executive of JPMorgan Chase, the beneficiary of $25 billion in public funds. Nocera explains that he obtained the call-in number and was able to listen to a recording of the proceedings, unbeknownst to the executive, whom he declines to name.

Asked by one of the participants whether the $25 billion in federal funding will "change our strategic lending policy," the executive replies: "What we do think, it will help us to be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling."

Referring to JPMorgan's recent government-backed acquisition of two large competitors, the executive continues: "And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way, and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop."

As Nocera notes: "Read that answer as many times as you want--you are not going to find a single word in there about making loans to help the American economy."

Later in the conference call the same executive states, "We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side."

"It is starting to appear," the Times columnist writes, "as if one of the Treasury's key rationales for the recapitalization program--namely, that it will cause banks to start lending again--is a fig leaf.... In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation."

Early this month, he explains, "in a nearly unnoticed move," Paulson, the former CEO of Goldman Sachs, put in place a new tax break worth billions of dollars that is designed to encourage bank mergers. It allows the acquiring bank to immediately deduct any losses on the books of the acquired bank.

Paulson and other Treasury officials have made public statements calling on the banks that receive public funds to use them to increase their lending activities. That, however, is for public consumption. The bailout program imposes no lending requirements on the banks in return for government cash.

Already, the credit crisis has been used to engineer the takeover of Bear Stearns and Washington Mutual by JPMorgan, Merrill Lynch by Bank of America, Wachovia by Wells Fargo and, last Friday, National City by PNC.

What the Wall Street Journal on Saturday called the "strong-arm sale" of National City provides a taste of what is to come. The Treasury Department sealed the fate of the Cleveland-based bank by deciding not to include it among the regional banks that will receive government handouts. It then gave Pittsburgh-based PNC $7.7 billion from the bailout fund to help defray the costs of a takeover of National City. PNC will also benefit greatly from the tax write-off on mergers enacted by Treasury.

All of the claims that were made to justify the bank bailout have been exposed as lies. President Bush, Federal Reserve Chairman Ben Bernanke and Paulson were joined by the Democratic congressional leadership and Barack Obama in warning that the bailout had to be passed, and passed immediately, despite massive popular opposition. Those who opposed the plan were denounced for jeopardizing the well being of the American people.

In a nationally televised speech delivered September 24, in advance of the congressional vote on the bailout plan, Bush said it would "help American consumers and businessmen get credit to meet their daily needs and create jobs." If the bailout was not passed, he warned, "More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account.... More businesses would close their doors, and millions of Americans could lose their jobs ... ultimately, our country could experience a long and painful recession."

One month later, the bailout has been enacted, and all of the dire developments--banks and businesses disappearing, the stock market plunging, unemployment skyrocketing--which the American people were told it would prevent are unfolding with accelerating speed.

While Obama talks about the need for all Americans to "come together" in a spirit of "shared sacrifice"--meaning drastic cuts in Medicare, Medicaid, Social Security and other social programs--and the cost of the bailout is cited to justify fiscal austerity, the bankers proceed to ruthlessly prosecute their class interests.

As the World Socialist Web Site warned when it was first proposed in mid-September, the "economic rescue" plan has been revealed to be a scheme to plunder society for the benefit of the financial aristocracy. The American ruling elite, utilizing its domination of the state and the two-party political system, is exploiting a crisis of its own making to carry through an economic agenda, long in preparation, that could not be imposed under normal conditions.

The result will be greater economic hardship for ordinary Americans. The big banks will have even greater market power to set interest rates and control access to credit for workers, students and small businesses.

While no serious measures are being proposed, either by the Bush administration, the Republican presidential candidate or his Democratic opponent, to prevent a social catastrophe from overtaking working people, the government is organizing a restructuring of the financial system that will enable a handful of mega-banks to increase their power over society.

Barry Grey