Richard Blumenthal Asks Eric Holder Where the Foreclosure Prosecutions Are

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It took until Richard Blumenthal’s turn in Eric Holder’s appearance before the Senate Judiciary Committee today before Holder got asked about foreclosure fraud. Blumenthal generously suggested that, “I know the foreclosure crisis is on your agenda,” and then asked if we’ll ever see a prosecution on robosigning and other fraud.

Holder responded, at first, by pointing to states Attorney Generals, claiming they are conducting investigations. I do hope he’s thinking of Eric Schneiderman, Beau Biden, and Catherine Cortez Masto, because the ones working on the settlement are pointedly avoiding any real investigation. Holder then further dodged, suggesting DOJ might find other ways–like civil suits–to hold these banks accountable.

Finally, and perhaps most interesting, Bluementhal asked why DOJ had not intervened in the Bibby, Donnelly v. Wells Fargo suit, a whistleblower suit against Wells Fargo, BoA, Chase, Ally, and others for the illegal legal fees the banks charged homeowners, including veterans.

Holder hedged in response to that question, promising he’d find out who had made the decision not to intervene and the basis for the decision.

Unfortunately, Blumenthal pointedly avoided asking for a 30 day response to that request. So an explanation for why DOJ isn’t helping to sue banks for the illegal fees they’ve charged will probably come long after DOJ settles for those illegal fees.

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Jamie Dimon Owns Obama’s Testicles

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Jamie Dimon owns Barack Obama’s testicles. That’s the only explanation I can think of for why, rather than firing his JP Morgan Exec Chief of Staff for being incompetent, Obama simply shifted him over to serve as the public face of his Administration.

Ten months into his tenure as chief of staff, [Bill] Daley’s core responsibilities are shifting, following White House missteps in the debt-ceiling fight and in its relations with Republicans and Democrats in Congress.

On Monday, Mr. Daley turned over day-to-day management of the West Wing to Pete Rouse, a veteran aide to President Obama, according to several people familiar with the matter. It is unusual for a White House chief of staff to relinquish part of the job.

[snip]

The new set-up effectively makes Mr. Rouse the president’s inside manager and Mr. Daley his ambassador, roles that appear to better suit both men’s talents.

As you recall, Daley was hired as a sop to the banks, who thought endless bailouts weren’t enough bounty from this and the prior Administration and successfully demanded having one of their own in the White House gatekeeper position. And so, after fucking up the debt ceiling, and fucking up the introduction of Obama’s jobs push (and overseeing the passage of three trade agreements that will send jobs overseas), Daley has been moved into a figurehead role.

Here’s a snapshot of the kind of people whom Daley is sucking up to as “Ambassador”: the architect of the housing bubble-and-crash, the embodiment of corruption in the GSEs, and a guy who helped pass a law that will help his wife’s insurance company, only to leave to work for the Chamber of Commerce and a private equity firm.

Lately, Mr. Daley has been trying out his new role, deploying his back-slapping persona in Washington social circles. He recently held a private reception at his Ritz Carlton residence for a small group of D.C. elites, including former Fed Chairman Alan Greenspan, former Fanne Mae Chief Executive Jim Johnson and Yousef Al Otaiba, the United Arab Emirates ambassador to the U.S.

Former Sen. Evan Bayh (D., Ind.) said an invitation to lunch with Mr. Daley in his West Wing office was the first time he had heard from him.

So at a time when Obama’s campaign wants to pretend he’s taking a tough line with the 1%, he’s refusing to fire 1%er Bill Daley when he proves to be incompetent. Does this mean the banksters will effectively retain their own personal gate-keeper?

And FWIW, I believe Pete Rouse was and will be the best of the three Chiefs of Staff Obama has had, so I approve of that move. Though I question the wisdom of making the move just in time for another government shutdown, which is due up in the next few weeks.

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Blind American Concern Troll Finds Nut

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You may not be able to say this every day, but hats off to the Washington Post’s Richard Cohen. In an op-ed for Tuesday’s print edition that first hit the online version late Monday, Cohen analogizes the Masters of the Universe on Wall Street to scummy used car salesmen:

As a mere youth, I bought a used car in New York to drive to California to be with the woman of my dreams. Inexplicably, she decided to rush back to New York, so I promptly took the car back to the dealer. He made a shockingly low offer. The car had been in an accident, he explained. The chassis was bent. I was flabbergasted. I had just bought the car from him. If the chassis was bent, it was bent when I bought it. The salesman offered me a take-it-or-leave-it shrug. He probably now works on Wall Street.

That the morality of the used car lot has been adopted by Wall Street is now abundantly clear. Citigroup recently settled a civil complaint in which it was accused of selling mortgage-related investments that it knew were dogs. It was so certain that the investments were the financial equivalent of my used car that it bet against them — heads I win, tails you lose — and even selected the investments themselves, choosing from a cupboard of depleted and exhausted financial instruments. An investment in the Brooklyn Bridge would have been safer.

Go read the whole piece. Seriously.

Cohen punches Wall Street, Goldman Sachs, outrageously crooked and belligerent New York cops, Citigroup, JP Morgan Chase and the SEC. It is a once in a lifetime thing of Cohen beauty.

Next thing you know America’s Concern Troll will be slinging hash down at Zuccotti Park with the #OWS denizens.

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The FBI: Now, with 48% More Domestic Surveillance … but No Banksters

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The FBI produced a self-congratulatory report of the changes they’ve made since 9/11. It describes the FBI’s new intelligence focus. It boasts that it has a functional computer system (which for the FBI is an accomplishment) and 10,200 SCI work stations.

Oh, and it proclaims with joy that the FBI has had a 48% growth in surveillance
teams and capacity since 9/11. Let us rejoice in the proliferation of domestic spying!

But the most telling part of the report is the way it describes its threat-driven focus, then provides a list of prioritized threats. The report makes it clear that the FBI’s focus is driven not by what actual crimes are out there, but by what crimes it chooses to look for. And the list of its priorities puts terrorism, spying, cyber-attacks, public corruption, and civil rights ahead of white collar crime (you know–the banksters who crashed our economy?). This is similar to the priority list suggested by Robert Mueller at his reconfirmation hearing earlier this year…

  • Al Qaeda-launched attack like the Undie-bomber
  • Self-radicalized attacks like Mohamed Osman Mohamud
  • Spies like Anna Chapman
  • Cyber attacks allegedly launched by China
  • Massive corporate fraud committed by people like Lloyd Blankfein that weakens our financial system
  • Health care scams
  • Drug cartel violence
  • Public corruption

Though it appears that white collar crime has, since June, been demoted behind drug cartels and public corruption. And of course, the government has rolled out the new TCO designation, meaning that the FBI’s focus on Japan’s Yakuza technically now ranks higher than its focus on the gangsters dressed in banker’s suits who decimated our own country.

You see where this leads: to where the FBI doesn’t see–and therefore doesn’t investigate–the wholesale corruption of our economy, a crime affecting just about every American and doing far more financial damage than 9/11, because it is spending so much time finding or inventing enough terrorists to justify that being the top threat, the 18 model airplane plots it first invented, then stopped in 2010, rather than investigating banksters.

Mind you, the FBI report does boast of the big increase in penny-ante mortgage fraud arrests and convictions since 2007 (it notes that “mortgage fraud was not tracked separately in arrests and convictions until 2007”). But that’s still less than one mortgage fraud conviction for every 10,000 underwater homes and fewer fraud convictions than cybersecurity convictions. And in spite of the FBI claim that,

Since 2001, the FBI has focused on the most violent
criminals, the largest and most complex fraud schemes,
the most sophisticated and dangerous computer intrusions,
and the most corrupt public officials. [my emphasis]

It has netted precisely zero of those who propagated the complex fraud that brought down our country–not even Angelo Mozilo or anyone from Goldman Sachs, against whom they’ve got reams of evidence.

The FBI calls this emphasis on terrorism (and spies and hackers and corrupt politicians and Japanese gangsters) over white collar crime a “strategic” focus.

Sort of makes you wonder what objective this strategy is supposed to accomplish.

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The Scandal Is that Jonathan Alter Doesn’t See the Scandal

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[Sorry for my unannounced absence. I’m on a road trip visiting Mr. EW’s family. Thanks to Jim White and bmaz for guarding the likker cabinet! I know they’ll keep it safe!]

I once got in trouble for mocking people who thought that blowjobs were a scandal worth legal investigation, but torture was not. Given that Jonathan Alter is the so-called liberal who, weeks after 9/11, affirmatively embraced torture, I’m not surprised he still falls in the former group. On Thursday, he wrote a Bloomberg piece sycophantically wondering how Obama managed to have such a scandal-free Administration. This, of the President whose Administration continues to invent all sorts of legal gimmicks to protect his predecessor’s torture. And this, of the guy who is looking high and low for new ways to bail out the banksters from the consequences of their crimes.

This Administration has smothered what was left of rule of law. And yet Alter can’t find a scandal?

Part of the problem stems from Alter’s terms. he equates scandal with some kind of honesty.

President Barack Obama goes into the 2012 with a weak economy that may doom his reelection. But he has one asset that hasn’t received much attention: He’s honest.

Obama certainly lies: about his commitment to the public option, his opposition to telecom immunity, and even his belief that no one is above the law. But what Obama does more is spin–spending months claiming that the deficit is the biggest threat to our country, claiming that a bank settlement is necessary to get the housing market back on track. That kind of spin requires real analysis to catch. Which, I guess, Alter isn’t up to.

And part of Alter’s problem is his adoption of Brendan Nyhan’s definition of scandal: the reference to something as a scandal by a WaPo reporter on that rag’s front page.

Nyhan says that political scientists generally see The Washington Post as a solid indicator of elite opinion — so for his study, a problem officially curdles into a scandal once the S-word is used in a reporter’s own voice in a story that runs on the front page of the Post.

Given that one of the WaPo editorial page’s most striking ideological commitments is to torture, it seems nearly impossible that torture–and the refusal to prosecute it–would ever be a scandal by Nyhan’s (and therefore Alter’s) terms. And Dana Milbank’s bankster epiphany notwithstanding, WaPo reporters are, almost by definition, isolated from the effects of the banksters’ crimes by class and distance.

Read more →

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The “Good Faith” Dodge: Moving From Torture to Business?

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One short phrase in an article bmaz alerted me to yesterday set my blood to boiling.  I fumed about it off and on through the rest of the day and even found myself going back to thinking about it when I should have been drifting off to sleep.

The phrase?  “Good faith”

Here’s the phrase in the context of the article:

The U.S. Justice Department’s stepped up enforcement in the pharmaceutical industry has struck “the fear of God” in executives, a top lawyer at GlaxoSmithKline said today, addressing whether prosecutors have gone too far in building cases rooted in business conduct.

/snip/

The panel’s moderator, Jonathan Rosen, a white-collar defense partner in the Washington office of Shook, Hardy & Bacon, described what he called a “highly aggressive” enforcement environment.

Rosen posed questions to the panel members to explore the extent to which the government is criminalizing good-faith business decisions.

So, why would the longer phrase “criminalizing good-faith business decisions” set me off so? When I read that phrase, my mind flashed back to April, 2009 and the release of the torture memos.  Here is Eric Holder, as quoted by ABC News:

“Those intelligence community officials who acted reasonably and in good faith and in reliance on Department of Justice opinions are not going to be prosecuted,” he told members of a House Appropriations Subcommittee, reaffirming the White House sentiment. “It would not be fair, in my view, to bring such prosecutions.”

But Holder left open the door to some legal action, saying that though he “will not permit the criminalization of policy differences,” he is responsible as attorney general to enforce the law.

Uh-oh.  Now it’s even worse.  See the additional parallel?  Holder decried the “criminalization of policy differences” at the same time he said he wouldn’t prosecute those who acted in “good faith” on the torture memos.  The “good faith” in the business article above was smack in the middle of “criminalizing” “business decisions”. Read more →

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How the Fed Helped Qaddafi Keep His $200B in Loot

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I suggested yesterday that the West will be playing dumb about the extent to which Qaddafi looted the Libyan people becomes known.

But what about how Qaddafi looted us–or, at least, the Fed?

As this article laid out, one of the means by which Qaddafi was looting was the Central Bank of Libya.

Moammar Kadafi secretly salted away more than $200 billion in bank accounts, real estate and corporate investments around the world before he was killed, about $30,000 for every Libyan citizen and double the amount that Western governments previously had suspected, according to senior Libyan officials.

The new estimates of the deposed dictator’s hidden cash, gold reserves and investments are “staggering,” one person who has studied detailed records of the asset search said Friday. “No one truly appreciated the scope of it.”

[snip]

Most of the money was under the name of government institutions such as the Central Bank of Libya, the Libyan Investment Authority, the Libyan Foreign Bank, the Libyan National Oil Corp. and the Libya African Investment Portfolio. But investigators said Kadafi and his family members could access any of the money if they chose to. [my emphasis]

Central Bank of Libya was a significant owner (and is now a 59% owner) in the Arab Banking Company, which got $35B of loans during the crisis.

Arab Banking Corp., the lender part- owned by the Central Bank of Libya, used a New York branch to get 73 loans from the U.S. Federal Reserve in the 18 months after Lehman Brothers Holdings Inc. collapsed.

The bank, then 29 percent-owned by the Libyan state, had aggregate borrowings in that period of $35 billion — while the largest single loan amount outstanding was $1.2 billion in July 2009, according to Fed data released yesterday. In October 2008, when lending to financial institutions by the central bank’s so- called discount window peaked at $111 billion, Arab Banking took repeated loans totaling more than $2 billion.

Yet all the time the ABC was borrowing $2B chunks of money, Qaddafi was sitting on $200B, which he could have used to provide the bank liquidity.

Mind you, this kind of looting was no doubt going on–and is no doubt going on today, as big banks refuse haircuts in Europe and housing fraud settlements–more generally. Qaddafi is just the very ugly face of how the Fed lending allowed people and corporations who had been looting for some time were able to keep that loot.

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The West Is Shocked–Shocked!–to Find Qaddafi’s Loot in their Casinos!

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Now that they’re dancing on Moammar Qaddafi’s grave (or would be, if the rebels would end the trophy show of his body so he can be buried), they’re no doubt faced with a dilemma.

How to get all the money they bribed Qaddafi with over the years back into circulation, paying for consultants on reconstruction and generating fees for their banks?

I expect we’ll see a series of articles like this one, expressing shock–shock!–that Qaddai managed to loot $200 billion from his country.

Moammar Kadafi secretly salted away more than $200 billion in bank accounts, real estate and corporate investments around the world before he was killed, about $30,000 for every Libyan citizen and double the amount that Western governments previously had suspected, according to senior Libyan officials.

The new estimates of the deposed dictator’s hidden cash, gold reserves and investments are “staggering,” one person who has studied detailed records of the asset search said Friday. “No one truly appreciated the scope of it.”

Oh, I’m sure some people “appreciated the scope of it”–like the Goldman Sachs banksters who “lost” almost all of Libya’s investment fund for it. And it’s not like our government hasn’t been fully aware this has been going on. That’s all before you assume we’ve been using SWIFT to monitor Qaddafi’s looting in the name of counterterrorism.

Better for those who want to continue to profit off this money to express shock, though, or Libyans and others might cop on that the big play here is to continue to profit.

(In related news, see this Real News Network video on the looting in Sub-Saharan Africa.)

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Obama’s “Get Out of Jail for Helping 1.36% Card” for Banksters

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Yesterday, I described how the Obama Administration was going to charge the banks just $8 billion for immunity from a whole new swath of crimes. Shahien Nasiripour has more details which make the deal look even shittier. First, the proposed deal does appear to provide states immunity not just from robo-signing and the lies banksters made at origination, but also for their securitization errors.

In return for getting the banks to agree to the refinancing scheme and give up higher interest income, the states would release the banks from civil claims related to loan originations, the stage at which many homeowners say they were duped by unscrupulous lenders.

Last month, state prosecutors proposed to effectively release the five big lenders from legal liability for allegedly wrongful securitisation practices related to the banks’ treatment of loan documents. Taken together, the release from liability over poor origination, securitisation, servicing and foreclosure practices could amount to an effective grant of immunity for the banks from civil claims, people familiar with the matter said.

And in exchange, the banks would pay 80% of their $25 billion penalty into a fund that the same people who botched HAMP would use to help just 1.36% of homeowners who are underwater on their homes.

About 150,000 borrowers could benefit from the refinancings, as the vast majority of US home loans are owned by investors and government-controlled mortgage giants Fannie Mae and Freddie Mac. By comparison, nearly 11m US borrowers are underwater, according to CoreLogic, a data provider. The average underwater homeowner owes $258,000 on his mortgage.

In other words, all the settlement would do is help those who crashed our economy stay in business. The vast majority of their victims–and the US economy–would continue to pay the price for their crimes.

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Ben Bernanke Prepares to Rob My Mom

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My mom’s pretty stubborn (I come by it naturally). So in spite of the fact that I have been warning her to move her primary banking out of Bank of America into a solvent bank for over a year, she has yet to do so.

Which is why I’m so troubled that Bank of America is about to use my mom’s savings to back its derivatives counterparties.

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Money’s fungible, right? That’s what the anti-choice people say, anyway. So what’s the big deal that BoA has taken Merrill Lynch’s exposure to the European mess and put that risk where mom keeps her retirement? Yves Smith explains. First, this will make it all-but-impossible to unwind Bank of America when it goes under without disrupting the personal accounts of people like my mom. Significantly, if those derivatives pay off (for example, if Greece defaults) or require more collateral (because BoA gets downgraded again), then counterparties would get their money before mom does.

The reason that commentators like Chris Whalen were relatively sanguine about Bank of America likely becoming insolvent as a result of eventual mortgage and other litigation losses is that it would be a holding company bankruptcy. The operating units, most importantly, the banks, would not be affected and could be spun out to a new entity or sold. Shareholders would be wiped out and holding company creditors (most important, bondholders) would take a hit by having their debt haircut and partly converted to equity.

This changes the picture completely. This move reflects either criminal incompetence or abject corruption by the Fed. Even though I’ve expressed my doubts as to whether Dodd Frank resolutions will work, dumping derivatives into depositaries pretty much guarantees a Dodd Frank resolution will fail. Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. So this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral. It’s well nigh impossible to have an orderly wind down in this scenario. You have a derivatives counterparty land grab and an abrupt insolvency. Lehman failed over a weekend after JP Morgan grabbed collateral. [Yves’ emphasis]

As Yves points out, this will quickly result in the depletion of FDIC’s deposit insurance to pay my mom back for the money the banksters snatched. She suggests that Congress will quickly vote to fund the Treasury so it can pay my mom–and millions of other Americans–to replace their insured funds.

But it’s even worse than that. During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress. This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors. No Congressman would dare vote against that. This move is Machiavellian, and just plain evil.

She’s probably right that even the most Do-Nothing Congress in American history will eventually fund Treasury. I’m just not convinced it’ll happen quickly, or without some really big hostages demanded, first.

Now, mom’s in pretty decent shape for a retiree–between some pensions and other retirement funds, she could wait out the Do-Nothing Congress. And heck, I’m even willing to lend mom a few bob, even if she is so stubborn.

But most Americans are living paycheck to paycheck, and millions of them depend on what they’ve got deposited in Bank of America. It seems to me that Ben Bernanke has just unilaterally decided to make those BoA depositers lend banksters their life savings until such time as the Do-Nothing Congress gets around to fixing what are, as we speak, foreseeable and unacceptable consequences of this move.

Update: Jeebus I had a lot of typos in this. I hope I’ve gotten them all.

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