Gretchen Morgenson: Banks Bilking Taxpayers By Refusing To Buy Back Toxic Loans They Sold To Fannie And Freddie

New York Times:

From the earliest days of the credit crisis, the nation's big financial institutions have been less than forthcoming about ballooning loan losses buried inside their books. To some degree this is understandable: denial is a powerful thing, after all, and writing off troubled loans during a period of severe stress is, for bankers, the equivalent of getting a root canal.

As profits rebound at many of these institutions, however, artful dodging becomes more disturbing. And when disguising problems winds up harming the taxpayer -- the same folks who rode to the rescue of banks with billions of dollars -- the denial is downright exasperating.

Read the whole story: New York Times

Comments

[US1st2009]

09:00 PM on 06/08/2010

thank you Gretchen!

you have been a clear, intelligent, and consistent voice for the American public

we greatly need your mind and voice

[oldwhitewomantoo]

07:31 AM on 06/08/2010

“If the banks are not abiding by repurchase agreements, essentially they are saying the taxpayer should be on the hook, not them,” Mr. Eggert said. “It’s a hidden bailout.”

Kurt Eggert, a professor at the Chapman University School of Law

Not so hidden. And anyone who understands how Fannie Mae & Freddie Mac works has known all along that the American taxpayers would AGAIN be left holding the proverbial bag.

[ajk3400]

09:07 AM on 06/08/2010

Exactly - that is why they have existed from the beginning - to offload crap on the taxpayer once it starts to smell. They should be shutdown and all the bad load loans forced back on the originators.

[PhilipTaylor]

05:00 AM on 06/08/2010

THE FIVE BIGGEST WALL STREET BANKS ARE BANKRUPT AT LEAST 10 TIMES OVER and AS MUCH AS 50 TIMES OVER!

The L1E with ENR0N ACCOUNTING - HIDING THE FOLLOWING "OFF-THERE-BOOKS" and ignoring MARK-TO-MARKET!

IF THEY PUT ALL THE TOXIC WASTE SUCKED DRY OF MASSIVE HIDDEN FEES ON THEIR BOOKS THEY WOULD BE SEEN FOR THE ZOMBIES THEY ARE!

"Off-Balance-Sheet" for 5 largest Banks ranges from $32 Trillion - $82 Trillion

“Off-Balance-Sheet” Toxic Derivatives according to 0ffice of Comptroller of Currency, 0CC, quarterly Report:

1 JPM0RGAN $81TRILLION in Toxic Derivatives
2 BofA $78TRILLION
3 G0LDMAN $48TRILLION
4 M0RGAN $39TRILLION
5 C1T1GROUP $32TRILLION

http://www.occ.gov/ftp/release/2009-72a.pdf
Page23!

[EdCorner]

10:20 AM on 06/09/2010

Great post and link!

[citizenbla]

01:23 AM on 06/08/2010

"The top three lenders or loan servicers doing business with Freddie are JPMorgan Chase, Bank of America and Wells Fargo."

That should be "top three predators", criminals really! Suckering Fannie and Freddie and the Taxpayer.

[IDIOTA]

03:16 PM on 06/07/2010

The American tax payer is a cash cow for corporations both foreign and domestic. We are enslaved in a system that feeds the rapacious corporate "citizens".

[blacksun93]

12:33 PM on 06/07/2010

Great article! Maybe we can stop hearing about how Freddie Mac and Fannie Mae were the cause of the financial meltdown. It is an outrage that re-capitalized banks are not taking back their bad loans as they agreed to originally when they were pawned off to the taxpayer as good loans. Heads should roll! (They would if we were in China or they were little people here.)

Roy in Canada should shut up about the US -- I know for a fact that in Los Angeles people were hired by Citibank, US Bank, Apollo Lending, Countrywide and others who were previously convicted of fraud. They were hired for their proven ability to use high-pressure sales techniques to induce home owners to take out first and second mortgages they couldn't afford and to sweet talk them 'Oh you can refinance later,' when the marks themselves brought up the fact they couldn't afford the loan on offer. It took sociopaths to sell these loans! The lack of fiduciary responsibility to their customers by the banks and loan companies in the US is a crime in Europe! As it should be but won't here! Some reform!

[Roy in Canada]

11:56 AM on 06/07/2010

Bull Chit of an article.....It was the government that forced lenders to give mortgage loans to people hat couldn`t afford them, or to those that had bad credit...Lenders were also forbidden to even ask how much money they made, to determine whether these people could afford the monthly payments....Fannie May and Freddie Mac were forced it increase (Clinton mandate) the percentage of bad mortgages to over 50% of their holdings....Yet, when the collapse came, it was the "greedy" bankers that were at fault....But no one wants to point out the "greed" of those who took on a mortgage that they couldn`t afford....

[EdCorner]

12:34 PM on 06/07/2010

You really need to investigate your facts more, Roy. Read 13 bankers to get a clue. The banks at first didn't like the government mandate but they saw the advantages of a government bailout and so took advantage of everyone - including putting those that had no jobs into mortgage debt. Those that point to borrowers that borrowed more than their homes were worth, they were just buying into the BS of those that were supposed to know better - the banks. Now it turns out the banks were shorting the exotic instruments they were creating and in essence shorting America and their own BS of prices not ever going down. It was the banks Greed, pure and simple. I don't not blame anyone that bought into the banks propaganda to the point where they were writing liar loans. The investment banks had an insatiable thirst for more mortgages that they could slice and dice and turn into CDO's and escape ALL RISK for their bad bets.

[citizenbla]

01:26 AM on 06/08/2010

Roy is dangerously ill informed. 80% of loan fraud is committed by the lender not the borrowers.

[ConjureMan]

11:02 AM on 06/07/2010

"I am shocked, theres gambling going on here"(fm: Casablanca). The banks are F'ing the people, AGAIN, and Holder and Obama (the Goldman-Sachs butt boys) are doing nothing about it! Does that really catch anyone by surprise? (We have had over a year of the phony populism, and were wise to them now)...SO WHAT???

[pgobrien]

09:38 AM on 06/07/2010

EVERYBODY should click over and read this article in the NYT.

Clearly, it's way easier to keep blaming Fannie and Freddie and deflect anger over to the government's wards than to let it out that THERE'S ALWAYS BEEN A SAVE FOR THE TAXPAYER -- IT'S BEEN THERE ALL ALONG -- and banks have always been required to take back bad loans or loans that were sold to Fannie and Freddie fraudulently. So, why has this not been made to happen?

Amazing. How come we only hear that Fannie and Freddie supposedly encouraged mortgages to po' folk that turned out bad, and not that banks have always been required to buy back back loans if they sell them to unqualified folks, so there's been no incentive to sell bad loans at all, that's been a pure fiction?

How come we don't hear that the taxpayer had a protection in place all along, only now the banks don't want to pony up what they're contractually obliged to pay us (they'd rather declare record earnings and pay out MEGA-bonuses to their brilliant financial staff).

Just look at what this article is saying! The taxpayer has had protection all along, only the banks are trying to hide the safety vest from us.

What gall!

[blogisti]

09:19 AM on 06/07/2010

The fact that the CEO's of the major banks are still in charge of these banks and have paid no penalty nor were asked to account for their behavior by answering to indictments is all the proof you need to know that the future will be like the past.
Banks that are too big to fail, will fail. The taxpayer will, again, pick up the tab.
Sadly, the government can't afford to give bailouts to the poor and middle class too.
Besides, giving out money to people for nothing is just plain wrong. The rich are the exception to the rule of course.
New Rule(same as old rule). Whenever the rich can benefit from changing rules, laws, ideologies, political parties or countries, they will do so. Greed trumps all morals, creeds, national boundaries and ideologies.

[Lorianne]

09:48 AM on 06/07/2010

They weren't punished, they were REWARDED.
That tells you all you need to know about most of our Congress (and Obama who was in Congress at the time).

[PhilipTaylor]

08:01 AM on 06/07/2010

SOLVE 90% of AMERICA'S PROBLEMS (Perhaps the WORLD's as well):

AUTOMATE THESE CRIMES OUT OF EXISTENCE USING TODAY'S TECHNOLOGY!

1) Usury
2) Loan-sharking
3) Subprime lending Derivatives SCAMS

CHOSEN FOR USURY! AND USURY MUST END! END THE FED ALSO!

Credit Currency instead of DEBT-OUT-OF-THIN-AIR by USURY SUCKING BANKSTERS and THE FED!

[realitytrumpsbull]

07:04 AM on 06/07/2010

Freddie/Fannie MicMac scammy-wammy, the whole thing's crooked as far as I'm concerned, and the only way I'm ever signing mortgage papers is if someone puts a pen in my cold, dead fingers, but good luck forging my signature, because I don't think that they can force you to make payments once you're dead and gone, plus, once you hit that stage, you probably really don't care very much about your credit rating anyway.

If you can afford a home, more power to you. But, if you can't, honestly can't, stay the hell away from the mortgage officer, 'cause you've got no business even talking to em. These folks are in business to make money, and one of the ways they make money, or have in the past, at least, is by signing folks up for housing-related lending agreements that the borrower eventually defaults on, and the property reverts to the bank under repossession etc. So, if you really don't have the dough, don't go there, you'll hate yourself later. Better off renting, keeps the costs down, no confusion on who owns the property when all is said and done, you're not directly liable for the property taxes, upkeep, and so forth. I think some people play Monopoly in real time. I don't want games, I just want a warm place to sleep, and renting gets you that a darn sight cheaper than being a 'home owner'(owned?)

[Margo Arrowsmith]

07:22 AM on 06/07/2010

"nd one of the ways they make money, or have in the past, at least, is by signing folks up for housing-related lending agreements that the borrower eventually defaults on, and the property reverts to the bank under repossession etc."

No, in the past they made money by making mortgages that got paid back. It is in the current times that they make money through defaults, it used to be that the last thing the bank wanted was your house.

"Better off renting, keeps the costs down, no confusion on who owns the property when all is said and done, you're not directly liable for the property taxes, upkeep, and so forth"

Well, you are correct that if you can't afford it, you shouldn't do it, but renting isn't always cheaper and good that you did use the word 'directly' because it is the tenant who pays the taxes, and pays for repairs. AND you have no control over what is going to happen to rents. In most places landlords can and will raise them yearly and too often making them unaffordable.

We really need something different all together to get people housed.

(I think that things started to go wrong, btw, about the same time that realtors stopped selling houses and started selling 'homes' You don't buy or rent a home, you buy or rent a house or apartment and make it into a home.

[beebster]

07:40 AM on 06/07/2010

Dont you remember "Snidely Riplash"? The banks have always made money by taking your home. Thats a falsehood created by the banks that they dont want your home. Thats why they make you put up your home as collateral. If they get your money and your home its a win win for them.

[agrippa52]

08:41 AM on 06/07/2010

realitytrumpsbull

quite true.

be very careful around banks and money lenders of all sorts

[Lorianne]

09:50 AM on 06/07/2010

and realtors

[me again]

06:40 AM on 06/07/2010

Apparently bankers are not allowed in their own minds to have a bad quarter.

[cybersense]

05:54 AM on 06/07/2010

Bankers: Man, that toxic oil spill got us out of this mess. Now, we don't look so bad.

[EdCorner]

12:04 PM on 06/07/2010

Does this oil spill remind anyone of the boom and bust? Toxic sewage that can't be stopped (banks and their toxic holdings) or capped (Fannie and Freddie) with huge costs to small businesses and consumers and a toxic plume floating around the world and the government not being able to do anything substantial but has let those that caused the problems to be the solution. When will the government step in and reward them for failing with huge subsidies and zero interest rate loans from the Fed? I know this might seem a little far-fetched, but they say that nothing happens by accident.

[rak6748]

03:52 AM on 06/07/2010

I found the article below very interesting and right on point.

Banks Profit from Near-zero Interest Rates: Another Reason for States to Own Their Banks.
Avoiding Another Lehman-style Credit Collapse.

http://globalresearch.ca/index.php?context=va&aid=19583

[beebster]

07:43 AM on 06/07/2010

Thanks for the link, boy that says it all. The banks cant be trusted.

[agrippa52]

08:44 AM on 06/07/2010

beebster

banks can not be trusted.
Fool me once, shame on you. Fool me twice, shame on me.

Do your own research; read and understand the paperwork.