Foreclosure fraud isn't about losing paperwork or having incorrect paperwork. It is about committing fraud and trying to manipulate the U.S. legal system. No one -- not even a bank -- can show up in court with phony evidence.
State Attorneys General decry foreclosure fraud, because among other things, people signed affidavits making representations that were untrue. This is fraud on the court. All of these foreclosures may be vacated.
Corrupt people in Congress and corrupt regulators cannot intervene for the banks this time. Banks have to face state courts, and many Attorneys General are happy to take them on.
Banks that committed fraud on the court do not get a do-over. Even if they can show up later with correct documents, it does not erase the original crime of fraud on the court. Anyone who presented phony documents as evidence in court broke the law.
Former Ohio Attorney General Richard Cordray advised banks that engaged in fraud on the courts (by submitting falsified affidavits) to negotiate meaningful loan modifications.
Jamie Dimon's Evasion
Jamie Dimon, CEO of JPMorgan Chase, said that JPMorgan did not foreclose on people who didn't deserve it. Dimon was dismissive saying JPMorgan might have to pay some penalties, but it should just carry on with foreclosures. JPMorgan's third quarter 2010 report contradicts its CEO:
JPMorgan's role in alleged foreclosure fraud had already been made public when Dimon made these ill-considered statements."But the financial statement itself proved the lie. The bank said it was carefully checking 115,000 mortgage affidavits. It set aside a whopping $1.3 billion for legal costs. And it put an extra $1 billion into a now $3 billion fund for buying back bunk mortgages and mortgage products."
"Too Big to Fail Rears its Head Again," by Annie Lowrey, Washington Independent, October 14, 2010.
In a CNBC interview, Former Ohio Attorney General Richard Cordray retorted to baseless claims made by Ally Bank, formerly known as GMAC Bank, which was bailed out by TARP. Ally said that it didn't know of instances of improper foreclosures. Cordray shot back that every foreclosure done with falsified affidavits was improper. It's fraud on the courts. He stated that as yet, no one knows the scope, but it could be tens of thousands or hundreds of thousands of instances of fraud on the court.
The fact that this happened repeatedly doesn't make it more excusable, it makes it worse. Ally Bank, Bank of America, and JPMorgan have admitted to this practice. Apparently they had "fraud as a business model."
The good news for banks is that Richard Cordray was not reelected to the post of Ohio's Attorney General. The bad news for banks -- and the good news for Ohio -- is that Cordray may become an Ohio Supreme Court Justice.
Robert Rubin Dodges Responsibility
The Economist's Buttonwood Gathering in New York on October 25 featured Robert Rubin, former senior advisor of Citigroup (also former Treasury Secretary under President Bill Clinton, and former Co-Chair of Goldman Sachs) as head of the first panel. He led a role-play about what might happen if one of the United States defaulted on its debt in the year 2013.
States cannot declare bankruptcy, but neither Rubin nor any other panel member mentioned it. Instead of putting states on notice now that they have to get their budgets in order -- even if it means cutting back on promises -- the panel suggested that the Federal Government should bail out the states.
When it came time for Q&A, I asked the first question and framed it by pointing out the irony of this panel discussing a potential state default and systemic risk. While many states have been fiscally irresponsible, their distress is now acute due to fraudulent lending further damaging the economy leading to reduced tax revenues.
Moreover, weak states also have higher borrowing costs, since municipal bond insurers' credit ratings imploded after they sold credit default swap (CDS) protection on value destroying securitizations (CDOs).
Rubin's Citigroup bought credit default swap protection from Ambac, one of the two largest municipal bond insurers, on Citi's value destroying mortgage backed securitizations.
During Rubin's watch as Citigroup's "risk wizard," Ambac sold protection on Citi's toxic CDOs including Diversey Harbor ($1.875 billion), Ridgeway Court Funding I ($1.57 billion), Ridgeway Court Funding II ($1.95 billion), Adams Square II ($510 million), 888 Funding ($500 million), Class V Funding III ($500 million). Citi settled many of these contracts with Ambac for deep discounts. (The Fed did not have taxpayers' interests in mind when it settled AIG's transactions with Goldman Sachs and others for 100 cents on the dollar.)
Ambac filed for Chapter 11 bankruptcy on November 8, 2010, two weeks after Rubin's shameful performance on this panel.
Robert Rubin didn't express an ounce of regret (or context) for his role in the crisis. On the contrary, he was insufferably smug. In his opening remarks, Rubin self-servingly asserted that no one could foresee the crisis in 2007, despite ample public evidence to the contrary. Citigroup and Ambac never came up. (See also "Congress's FCIC Nearly Nailed Former Citigroup Executives to the Wall -- Then Blew It," Huffington Post, April 8, 2010.)
David Fry, author of ETF Digest, and Janet Tavakoli (November 2, 2010) discuss a range of issues from foreclosure fraud, JPMorgan Chase, Goldman Sachs, AIG, Citigroup, Bank of America/Countrywide, and public denials and revisionist history by Robert Rubin.
Correction: During the course of this interview, I incorrectly stated that Laura Tyson had been on Ambac's Board. She is on the Boards of Morgan Stanley, AT&T, and Eastman Kodak.
Said unlawful foreclosures are a pattern of illegal activity carried out as part of an enterprise that is owned or controlled by those who are engaged in the illegal activity, or in other words racketeering. I have heard Attorney General Richard Cordray of Ohio use these words in connection with describing the unlawful foreclosures that he is investigating. If the Attorneys General do not bring CRIMINAL racketeering charges against the bank executives, the people who are supposed to be the guardians for the hard-working families will be seen as complicit in the crime of illegally throwing hard working women, children, and men from their homes into the streets.
Thank you for your time and attention.
The big corporations manipulate their financial statements by "earnings management". It goes on at most corporations because top management doesn't see anything wrong with doing it, as it helps them make their bonuses and keeps the stock price high leaving their stock options in the money.
"William J. Bruns, Jr., and Kenneth A. Merchant reported the results of their survey of the readership of the Harvard Business Review (HBR). That survey described 13 earnings-management situations that the authors had directly or indirectly observed, and asked HBR readers to rate the acceptability of those practices. Characterizing the results as “frightening,” they observed the following:
It seems that if a practice is not explicitly prohibited or is only a slight deviation from rules, it is an ethical practice regardless of who might be affected either by the practice or the information that flows from it. This means that anyone who uses information on short-term earnings is vulnerable to misinterpretation, manipulation, or deliberate deception.
We have no doubt that short-term earnings are being managed in many, if not all companies. Some of these earnings-management practices can be properly labeled as immoral and unethical."
http://www.nysscpa.org/cpajournal/2007/807/essentials/p64.htm
GE has long been one of the biggest manipulators of financial statements ever under the guise of 'earnings management'.
http://www.forbes.com/2009/08/04/ge-immelt-sec-earnings-business-beltway-ge.html
The American folly of rewarding banker fraud and hiding the harm of the fraud so the sensitive citizens can live idyllic lives, is being daily exposed as our Federal Reserve prints more monies and the bankers execute ever more egregious crimes. We are being led by traitors and fools who disrespect our laws, our citizens and themselves.
Our dominance was based on selling our skills, know-how and expertise to the rest of the world. But now our reputation is in the toilet.
We need to tighten our belts and start from scratch. But like spoiled kids and perhaps bullies, we act or pretend "we know it all." No one including Americans are buying that act.
To give credit where it isdue, Fox News, Libertarians and Tea Party were against bank bail-outs.
Why is it there so few women like you in our country who have your keen understanding and sense of what's going on in our country and its finances?
We're swarmed over with so many people who don't know, don't care to know, don't WANT to know the truth, it can truly make one feel quite lost.
I'm not trippin', just tryin' to say how much I appreciate you.
But if it's true that "nobody" could see the "crisis" why weren't borrowers shielded from the downside of a risk that "nobody" -- neither of them -- could see? There were two parties: lenders and borrowers. "Nobody" could see the upcoming risk. Lenders were bailed out from the downside of their own poor decisions (eliminating the right of borrowers to negotiate with insolvent and desperate banks) but for borrowers it was the "free market" at work .. never mind the $13 trillion in government subsidies the other side of that contract received.
Rubin's too smart to have not thought through this argument: would be interested in hearing how he addresses it .. if only somebody would ask.
This whole affair become so perverse because no one is willing to consider foregiving debt as a means of resolving this foreclosure crisis.
Instead ... they are willing to trample laws and the legal process to make sure that they do not foregive any debt.
Their greed blinds them to the intent of the "original" version of The Lord's Prayer ... "foregive us our debts ... as we foregive our debtors".
What would be so bad in passing the Bankruptcy Cramdown Bill ... and begin allowing the bankruptcy courts to foregive debts ?
Who are we serving ... the Lord ... or money ?
When you buy a home, nowhere on that promissory note does it say that the borrower doesn't have to pay back the note if the property value declines below the amount borrowed. THERE ARE NO GUARANTEES. The promissory note is a legal binding contract for a certain sum of money that needs to be paid back with int by a certain date.
So let's say you held that note for a borrower now under water. Would you be willing to forgive the debt they owe you because they are struggling NOW? Perhaps you would be willing to renegotiate the contract by decreasing the mortgage each month and tacking on the principal still owed onto the back of the note. But what if you needed the money each month to pay your bills? The property would revert back to the seller for that seller to try to resell and get the best price which would probably mean to stop holding the note and let them get a conventional mortgage. I am saying that getting the entire money owned instead of holding the mortgage might give the seller more money each month to pay their bills.
What everybody needs to keep in mind is that real estate goes up and goes down. Homes under water now could easily be up considerably and in fact appreciating 5 years from now. I think there is a lot of panic and short-term thinking instead of taking a deep breath and not bailing in a panic.
the no guarantee argument goes both ways nobody guaranteed the bank that the collateral would be worth as much as the payments.
if you bought a home at the height of the bubble you are a fool to keep the collateral and continue making payments, jp morgan had no problem walking away from a billion dollar building and buying another right down the street.