01/30/2012 archive

"Mortgage Fraud is a Top Priority for This Administration"

By Matt Stoller, Naked Capitalism

Friday, January 27, 2012

Department of Justice official Tony West, July 2009

Mortgage fraud is a top priority for this Administration, especially when public dollars are at stake.

US Attorney Lawrence Brown, Oct, 2009

The vigorous pursuit of real estate professionals who perpetrated mortgage fraud is a top priority for federal authorities in this region.

Department of Justice official Tony West, Jan 2010

Mortgage fraud is a top priority for this administration. We will aggressively pursue both individuals and corporations who defraud federal mortgage insurance programs, which are so important to this economy.

US Attorney Dennis Burke, March, 2010

Mortgage fraud is a top priority for the U.S. Justice Department in the District ofArizona, where it has destroyed property values, lending institutions, and entire neighborhoods in our community. No question, complex fraud schemes – a prime example, here – played a role in crashing our real estate market. Culprits like these defendants will be tracked down, prosecuted and convicted. I congratulate the FBI for their thorough investigation that led to this significant sentence.

U.S. Attorney David Gaouette April, 2010

The prosecution of those who commit mortgage fraud is a top priority of the Department of Justice and this U.S. Attorney’s Office. Those who commit such crimes seriously erode the confidence of financial institutions to lend money which is a key element of the future strength of our economy.

US Attorney Wilfredo Ferrer, Southern District of Florida, May, 2010

There is rampant fraud in South Florida. I think that’s unfortunate. It is embarrassing that we are known in some circles as the fraud capital of the country. I don’t like that title.

US Attorney John Walsh, Jan 2011

The investigation and prosecution of mortgage fraud is a top priority of the Justice Department and this office. Prosecuting these cases helps protect the integrity of the housing market.

Promises Made, and Remade, by Firms in S.E.C. Fraud Cases

By EDWARD WYATT, The New York Times

Published: November 7, 2011

Nearly all of the biggest financial companies, Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America among them, have settled fraud cases by promising the S.E.C. that they would never again violate an antifraud law, only to do it again in another case a few years later.

A New York Times analysis of enforcement actions during the last 15 years found at least 51 cases in which 19 Wall Street firms had broken antifraud laws they had agreed never to breach.

…

S.E.C. officials say they allow these kinds of settlements because it is far less costly than taking deep-pocketed Wall Street firms to court and risking losing the case. By law, the commission can bring only civil cases. It has to turn to the Justice Department for criminal prosecutions.

FCIC Referred Criminal Securities Fraud Violations to Justice Deparment a Year Ago

By: David Dayen, Firedog Lake

Monday January 30, 2012 11:39 am

I remember confirming with the Justice Department that they received those referrals of potential violations of law from the FCIC. As it turns out, that happened a year ago Saturday. And we’ve heard nothing arising out of those criminal referrals from the existing Financial Fraud Task Force.

In addition, we knew at the time that those criminal referrals related to violations of secruties law, in other words precisely what the new RMBS working group would want to investigate.

…

The Justice Department has had this information, contained in depositions and official testimony, for a little over a year. They’ve done nothing. The Securities and Commodities Fraud working group would have been the natural arm of the Financial Fraud Task Force to which to refer those FCIC findings. The co-chairs of that group included Lanny Breuer and Robert Khuzami, who are also co-chairs of the RMBS working group that Schneiderman co-chairs.

Even those excited about this working group would have to admit that the same people at the federal level had the same access to the same violations of law and sat on their hands for the entire tenure of the Obama Administration. That’s why some people are skeptical that this new working group will lead to anything real. I recognize the claims that the dynamic around financial fraud and making Wall Street pay has changed generally, and that the Administration’s political people know they have a problem with coziness toward Wall Street, and so they may let the rope out a little bit. Plus there are prosecutors in DoJ at a lower level who may be dying to get their hands on some of this material and work with the new mandate to make some real noise. I understand that perspective. Time will tell if that will resolve in any different manner than the FCIC criminal referrals did.

Angelides closes by saying that “I look forward to President Obama’s newly appointed task force righting the financial wrongs that were committed, including the matters identified by the FCIC and referred to the Department of Justice.” So do I.

Over the weekend Occupy Oakland attempted to occupy an abandoned building into into a community center to provide education, medical, and housing services for the 99%. Police responded with tear gas, rubber bullets, beanbag rounds and mass arrests. From Occupy Oakland Media

January 29, 2011 – Oakland, CA – Yesterday, the Oakland Police deployed hundreds of officers in riot gear so as to prevent Occupy Oakland from putting a building, vacant for 6 years with no plans for use, from being occupied and “re-purposed” as a community center. The Occupy Oakland GA passed a proposal calling for the space to be turned into a social center, convergence center and headquarters of the Occupy Oakland movement.

The police actions tonight cost the city of Oakland hundreds of thousands of dollars, and they repeatedly violated their own crowd control guidelines and protesters civil rights.

With all the problems in our city, should preventing activists from putting a vacant building to better use be their highest priority? Was it worth the hundreds of thousands of dollars they spent?

The OPD is facing receivership based on actions by police in the past, and they have apparently learned nothing since October. On October 25, Occupiers rushed to the aid of Scott Olsen who was shot in the head by police, and the good Samaritans who rushed to his had had a grenade thrown at them by police. At 3:30pm this afternoon, OO medics yet again ran to the aid of injured protesters lying on the ground. Other occupiers ran forward and used shields to protect the medic and injured man. The police then repeatedly fired less lethal rounds at these people trying to protect and help an injured man.

No one condones throwing objects at police, violence or vandalism but it does not justify the overreaction by the Oakland police department use of military type weapons to stop unarmed protesters.

From Kevin Gosztola who describes the videos below in his reporting on the Occupy movement at FDL:

Recorded video footage from the scene shows officers did not give a dispersal order. They pushed protesters toward the YMCA and would not let them leave the scene as they ordered them to “submit” to the arrest. The protesters then did what anyone would do as a battalion of riot police closed in on them: they found the nearest escape route, which happened to be through an entrance to the building. [*See the 30-min mark of the video below.]

I will not condone the throwing of objects at police, but the video captured by Mills, who was also at the scene when percussion grenades, tear gas and other weapons were being fired by police, calls into question the [statements by the city  that protesters were “charging” police. Yes, they were advancing on the riot police, slowly. A handful, like any protest, were egging on the riot police. But, if you watch the video the moment the riot police move on the protesters they immediately fall back. They do not let the police charge into them, which raises doubts about whether it was ever necessary to fire off any chemical weapons at protesters to force the crowd to disperse.

Sunday night in solidarity with Oakland Occupiers took to the streets in cities across the country:

#SolidaritySunday with Oakland Marches in NYC and Across the US; Bank of Ideas Being Evicted in London

As of 8pm EST, actions are currently happening or planned in response to extreme police violence used against Occupy Oakland yesterday in New York City, Boston, Toronto, Vancouver, Melbourne, Oslo, Philadelphia, DC, Chicago, Los Angeles, Dallas, Portland, Tampa, Indianapolis, New Haven, Orlando, Jackson, Des Moines, Hollywood, Baltimore, Portland ME, Tulsa, Denver, St. Louis, Eugene, Nashville, and Detroit. We have also received word that the Bank of Ideas in London is being raided!

At noon today, Occupy DC faces a ban on camping in the parks but will remain in McPherson Square.

We stand with the Occupy Wall Street movement and the right to peaceful assembly.

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

The opinion by Kuttner is an absolute must read.

Robert Kuttner: Eric Schneiderman: Hero or Goat?

The activation of the administration’s long dormant task force on criminal misconduct in the financial collapse, with New York’s progressive attorney general Eric Schneiderman as co-chair, could be the most fateful political and economic development of the election year. There are still immense pitfalls ahead, as Wall Street allies inside the administration and on Wall Street itself try to reduce Schneiderman’s role to that of symbolic fig leaf.

But President Obama has done something potentially momentous for which he deserves our praise, even if he himself does not fully grasp the implications. The significance of the shift is still in play, of course, and will be made clearer as events unfold over the next several weeks.

Some skeptics in the progressive community have raised questions both about the upside for Schneiderman and his motives. Given the administration’s feeble record on prosecutions to date, the critics are right to flag the likelihood that people like Attorney General Eric Holder and SEC enforcement chief Robert Khazumi will try to sandbag Schneiderman. But my reporting suggests that they underestimate both the man and the dynamics that have been set loose.

Paul Krugman: The Austerity Debacle

Last week the National Institute of Economic and Social Research, a British think tank, released a startling chart comparing the current slump with past recessions and recoveries. It turns out that by one important measure – changes in real G.D.P. since the recession began – Britain is doing worse this time than it did during the Great Depression. Four years into the Depression, British G.D.P. had regained its previous peak; four years after the Great Recession began, Britain is nowhere close to regaining its lost ground.

Nor is Britain unique. Italy is also doing worse than it did in the 1930s – and with Spain clearly headed for a double-dip recession, that makes three of Europe’s big five economies members of the worse-than club. Yes, there are some caveats and complications. But this nonetheless represents a stunning failure of policy.

And it’s a failure, in particular, of the austerity doctrine that has dominated elite policy discussion both in Europe and, to a large extent, in the United States for the past two years.

The surprise announcement by President Barack Obama that he was appointing New York State’s Attorney General Eric Schneiderman to head a new group, the Residential Mortgage-Backed Securities Working Group, that would be investigating securities fraud from the housing bubble and financial crisis. The announcement elicited some interesting reactions from the President’s supporters and critics expressing both praise and doubt about the new committee and just how much force it would really have considering the other appointees to the panel. Public opinion seems to be that few if any of the real perpetrators of the housing bubble and financial crisis have been held accountable.

On Friday, the group held its first press conference. US Attorney General Eic Holder, along with Mr. Schneiderman and Housing Secretary Scott Donovan, explained the purpose of the group, on what it would be focusing some of its powers and announced it had already issued 11 subpoenas:

“We are wasting no time in aggressively pursuing any and all leads,” Mr. Holder said. “In sending out those subpoenas, we consulted with the S.E.C. in making a determination as to where they should go.” Officials would not say which companies received the subpoenas.

“We are not going to be looking at the same things they are examining,” he added. “We’re going to be working with them but looking at a separate group of institutions.”

Schneiderman added that by working together with the SEC, IRS and Justice Department state Attorneys Generals would give them more information with which to bring prosecutions and civil suits at the state level:

In addition, the New York State Martin Act, which gives the attorney general broad powers to elicit information during investigations, “is more flexible than federal securities laws,” Mr. Schneiderman said. The New York and Delaware attorneys general also have jurisdiction over the trusts that hold the mortgages that underlie the mortgage-backed securities, making them “the bricks and mortar of this entire structure.”

By coordinating their efforts, group members might be able to share documents and information that usually would be in individual agency silos, Mr. Holder said.

Friday evening, Schneiderman sat down for an interview with MSNB’s Rachel Maddow, where he further discussed the committee’s focus, the agencies that would be involved and the roll of the states. Dayen, who still has strong reservations about the RMBS working group, thinks that the group lacks serious substance mostly because the use of wording like “resolving allegations”, not “crimes” and the lack of supporting staff and the appearance of disinterest by Assistant Attorney General for the Criminal Division Lanny Breuer who was absent at the press conference. However, he does see some promise. In the past, the IRS was reluctant to get involved, but as David Dayen at FDL News Desk indicated there could be huge tax fraud implications:

But I want to pull out the sentence I highlighted previously in Schneiderman’s interview which shows that at least he is thinking creatively about this. He said that “We have the Internal Revenue Service in because there are huge tax fraud implications to some of the stuff that went on.” I suppose he could be talking about a few different things (like the tax evasion from the banks using MERS instead of recording mortgage transfers at public records offices and paying a fee), but my guess is he’s talking about REMIC claims.

REMICs are an acronym for Real Estate Mortgage Investment Conduits. When you’re talking about mortgage pools used in securitization, you’re talking about REMICs. And REMICs have special tax treatment; they are exempt from federal taxes provided they only invest in “qualified mortgages” and other permitted investments. Here’s the important part: under the 1986 Tax Reform Act, the REMIC must receive all of its assets in the trust within 90 days and the assets have to be performing (not in default). Any REMIC violations make the vehicle subject to a penalty tax of 100%, with additional penalties as they apply.

Well, the strong suspicion is that, during the bubble years, the trustees did not properly convey the mortgages to the REMICs. Which makes the whole investment vehicle a massive tax fraud. That’s a huge level of exposure. You’re talking about $3 trillion in REMICs.

This obviously goes much deeper than fraud.

I became Attorney General about a year ago and started digging into this, and realized that New York and Delaware, which is why my collaboration with Beau Biden was so important, we had a unique place. Because all of the mortgage-backed securities were actually pools of mortgages deposited into New York trusts or Delaware trusts. We started looking at what she’s talking about, did they actually get all the paperwork done, things like that. And we realized that there’s a lot of work to do but a lot of potential for proving liability. [..]

To get this done Rachel, you need resources, you need jurisdiction, and you need will. And when I stood there today with Eric Holder and my other colleagues in government and other prosecutors, I really felt that we had that level of commitment […] what we realized as we started to go back and forth over the last few months is that we all need to work together. There are situations that, New York’s securities law is a stronger law in some ways than the federal laws. Some of our statutes of limitations, though, are shorter. So we can’t go as far back. The federal statute is longer. We need everyone together. And the folks that we have in on this… the Consumer Financial Protection Bureau, Rich Cordray just, a whole array of new powers just came into existence with his appointment, which the President just got done very recently. That’s a huge addition. We have the Internal Revenue Service in, because there are huge tax fraud implications to some of the stuff that went on. All of the people who are in this, all of the agencies who are designated, working together, can achieve so much more than any one of us on our own.

h/t David Dayen for the transcript.

There is still a lot of doubt about this commission and it’s purpose and goals. Matt Stoller at naked capitalism is curious to know if this panel will indict Vikram Pandit, the CEO of Citibank, for possible violations of Sarbanes-Oxley. He sees two problems with this task force. The first is the Obama administration’s policy “to protect the banking system’s basic architecture, which means the compensation structure and the existing personnel who run these large institutions.” And secondly:

Obama personally believes in the legitimacy of the existing banking institutional framework and he strongly suspects that no crimes were committed.  He has hired a raft of people – including Jack Lew, Tim Geithner, Eric Holder, Larry Summers, and so on and so forth – who agree, and has implemented policies such as Dodd-Frank that assume as much. [..]

These people aren’t stupid, they aren’t without principles, and they aren’t electorally driven.  They are ideologues.  They really believe in a neoliberal political economy, where government throws money at the economy through private channels and private channels do with it whatever they think best.

That’s quite a conflict of ideologies. Stoller concludes with more questions and doubts:

There are many details of the task force that are as of yet not public, so it is not clear to me that doing a case like this is possible.  But it’s quite obvious that mega-bank officials and regulators lying about the perilous state of various financial institutions to the public was a key part of the crisis, and that accountability on this front is probably critical to restoring faith in the system.  It would certainly be a big statement upfront if this is what this task force attempted to take on.  Will it?  That’s a very good question, and one I hope we get answers to, soon.

Here’s hoping that this isn’t just an election year sham and Eric Schneiderman has the will to stand up to the Obama neoliberals.  

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

January 30 is the 30th day of the year in the Gregorian calendar. There are 335 days remaining until the end of the year (336 in leap years).

On this day in 1969, The Beatles’ last public performance, on the roof of Apple Records in London. The impromptu concert is broken up by the police.

A din erupted in the sky above London’s staid garment district. Gray-suited businessmen, their expressions ranging from amused curiosity to disgust, gathered alongside miniskirted teenagers to stare up at the roof of the Georgian building at 3 Savile Row. As camera crews swirled around, whispered conjecture solidified into confirmed fact: The Beatles, who hadn’t performed live since August 1966, were playing an unannounced concert on their office roof. Crowds gathered on scaffolding, behind windows, and on neighboring rooftops to watch the four men who had revolutionized pop culture play again. But what only the pessimistic among them could have guessed-what the Beatles themselves could not yet even decide for sure-was that this was to be their last public performance ever. . . . . .

When the world beyond London’s garment district finally got to see the Beatles’ last concert, it was with the knowledge, unshared by the original, live audience, that it was the band’s swan song. On Abbey Road Paul had sung grandly about “the end,” but it was John’s closing words on the roof that made the more fitting epitaph for the group that had struggled out of working-class Liverpool to rewrite pop history: “I’d like to say thank you on behalf of the group and ourselves, and I hope we passed the audition.”

Of all foodstuffs, milk is unique in that it provides all of the nutritional needs for infant mammals.  In addition to nutrition, it also supplies essential antibodies the first few days to newborns.  Milk is unique to mammals, and is one of the reasons that mammals had the evolutionary advantage that they had when they arose during the age of reptiles.

However, humans are also unique in that we are one of the few mammals who continue to take it after infancy, and the only species that continues to take it after adolescence and into adulthood.  Milk is far from the perfect food for adults, but certainly can be part of healthy diet.

Humans are also unique in that we are the only species that takes milk in a natural setting from other species.  By that I mean that we actively collect it, not like giving the cat a saucer of milk.  The nutritive value of milk is species specific, and our habit to taking cows’ milk (for the most part) is quite unnatural.