03/07/2012 archive

You are no doubt familiar with songs about the old lamplighter and the old umbrella man and the old garbage collector and all these lovable old characters who go around spreading sweetness and light to their respective communities but, it’s always seemed to me that there is one member of this happy band who does an equally splendid job, but who has never been properly recognized in song or story, and this is an attempt to remedy, at least in part, that deplorable situation.

Wall Street’s Broken Windows

By William K. Black, New Economic Perspectives

Sunday, March 04, 2012

James Q. Wilson was a political scientist who often studied the government response to blue collar crime. The public knows him best for his theory called “broken windows.” The metaphor was what happens to a vacant building when broken windows are not promptly repaired. Soon, most of the windows in the abandoned building are broken. The criminals feel little compunction against petty destruction because the building’s owners evince no concern for the integrity of their building. Wilson took social norms, community, and ethics seriously. He argued that as community broke down fewer honest citizens were active in monitoring and policing behavior. The breakdown in community was criminogenic – it led to widespread serious blue collar crime. He urged us to take even minor blue collar crimes and breaches of civility seriously and to demand that they be contained through social pressure and policing.

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Wilson was strongly conservative. His research focus in criminology was almost exclusively blue collar crime. That was a shame because “broken windows” theory is most compelling in the context of elite white-collar crime and because the application would reveal interesting twists in the theory’s potential.

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He predicted in his work on “broken windows” that tolerating widespread smaller crimes would lead to epidemic levels of larger crimes because it undermined community and social restraints. The epidemics of elite white collar crime that have driven our recurrent, intensifying financial crises have proven this point. Similarly, corruption that is excused and tolerated by elites is unlikely to remain at the level of “a few deals.” Corruption is likely to spread in incidence and severity precisely because it undermines community and the rule of law and it is likely to grow more pervasive and harmful the more we “tolera[te]” it.

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In the elite white collar crime context we have been following the opposite strategy of that recommended under “broken windows” theory. We have been breaking windows. We have excused those who break the windows. Indeed, we have praised them and their misconduct. The problem with allowing broken windows is far greater in the elite white collar crime context than the blue collar crime context. The squeegee guys make tiny amounts of money and are hated and politically powerless. The mediocre financial CEO who engages in accounting control fraud because it is a “sure thing” causes the bank to report record (albeit fictional) profits and becomes wealthy and politically powerful. He uses his wealth to make charitable and political contributions that make him far harder to sanction. He claims that any crackdown on him is “class warfare” by “neo-Bolsheviks.” Incredibly, the Wall Street Journal continues to serve as the cheerleader and apologist for those who become wealthy by breaking windows, communities, and economies.

Wilson warned of blue collar “super predators.” He called them “feral” – wild animals. These criminals are in fact dangerous, but they are odd candidates for the title of “super predators.” Wilson noted that they were disproportionately black and that they were confined almost entirely to the poorest neighborhoods in America where their pickings are poor. Accounting control frauds occupy Wall Street and other financial centers – the richest neighborhoods in the world. Their “take” from fraud is extraordinary. The blue collar criminals that occupied Wilson’s attention late in his career were politically and socially powerless. The fraudulent CEOs that drive our recurrent, intensifying financial crises are wealthy and socially and politically dominant.

When is Foreclosure Theft? When the Mortgage is Recorded at MERS

Author: L. Randall Wray, EconoMonitor

March 1st, 2012

(O)ne bank lawyer tried to defend home theft as a “victimless crime”: “As a lawyer who did foreclosure work for many years for both borrowers and lenders, I assure you that robosigning is a victimless technicality. In only a handful of exceptions is there a wrongful foreclosure in which the outcome would have changed had the technicality been corrected. I am astonished to see foreclosure characterized as “theft” on an otherwise reputable site.”

Well, I guess it is nice that the lawyer thinks this site is “otherwise reputable”. But, in fact, robosigning is a go-to-jail crime. And illegally taking a home is certainly not victimless. Let us count the victims:

• The homeowner
• The neighborhood
• The national economy
• The justice system
• Property rights

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When is a foreclosure a theft? When the mortgage was recorded at MERS. MERS has no standing to foreclose. The typical mortgage was bought and sold about ten times before it finally got securitized. And those sales and purchases were not recorded at the county recorder’s office. Several important court cases have ruled that servicers using MERS have no standing to foreclose because the chain of title was thereby broken. That is about two-thirds of all mortgages made since the megabanks created the MERS monster. Now, those who go up against banks trying to foreclose using the “MERS destroyed the chain of title” defense do not always win. Judges are having a hard time getting their minds around the fact that banks have destroyed property law in the US. Or, they make a calculation that recognizing this fact will throw the whole real estate sector into disarray, hence overlook the home thefts as the lesser of evils.

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It is instructive just to read down the list of the variety of frauds the banks are using to illegally take homes, things like:

• Falsely claiming to be the owner/holder of the mortgage;
• Falsely claiming standing by use of names such as Trustee, Assignee, Nominee, Beneficiary, etc.;
• Fraudulently invoking the jurisdiction of the court;
• Preying on the ignorance of the court and homeowner;
• Falsely claiming Pooling & Servicing Agreements, industry standards, rules, guidelines or other industry-authored writings supersede the law;
• Failing to follow PSA guidelines;
• Robo-Signing legal documents without the legal authority to do so.
• Entering on-time payments as late, to exact illegal and unauthorized fees;
• Manipulating account records;
• Backdating legal documents;
• Filing forged documents in courts and public records;
• Charging force-placed insurance when the homeowner already has full coverage;
• Falsely reporting a default to the credit bureaus when it is the pretender lender who is manufacturing the default;
• Paying property taxes late, then charging the late penalties to the borrower;
• Paying taxes and insurance on the wrong property;
• Refusing payments to guarantee default;
• Adding thousands of dollars in unearned legal fees to create a default;
• Ignoring customer complaints and “qualified written requests”;
• Arrogantly violating numerous laws and regulations;
• Coercing the homeowner into signing a forbearance agreement to strip away their legal rights;
• Falsifying records and documents;
• Committing fraud upon the courts by stating they are the Holder and Owner of the Note – when in fact – they do not own or hold the “original” Note;
• Intentionally causing delays to run up your legal expenses;
• Creating fictitious documents (Lost Note Affidavits, Power of Attorney, etc.);
• Triggering the terms of the null and void Deed of Trust/Mortgage
• Apply to the trust for reimbursement after deducting the fees from the borrowers p&i payments, (Known as double-dipping)
• Rounding up ARM rates when on a downward trend;
• Not adhering to the terms of the loan documents;
• Creating additional false deficiencies through a variety of questionable practices;
• Adding misc. fees to purposely create a deficiency with the borrower’s next payment;
• Not applying payments to principal and interest;
• Committing perjury through misrepresentations;
• Withholding or redacting discovery evidence;
• Tampering with court transcripts and removing evidence from the record;
• Conjuring up events that never happened while refusing to provide documentation to support their fallacies;
• Refusing to cooperate with attempts to refinance and stop the illegal foreclosure;
• Using abuse of litigation, appeals and malicious prosecution to litigate forever;
• Payoffs to the consumer’s attorney, law enforcement officials, judges, court personnel and government officials;
• Threats & intimidation;
• Electronic surveillance;
• Wire Fraud / Mail Fraud;
• Conspiracy;
• Fraud in the inducement;
• Unjust Enrichment;
• Embezzlement;
• Racketeering – RICO;
• Extortion;
• Abuse of Process;
• Violation of ethics;
• Grand Theft;
• Tax Fraud (REMIC);
• Public Corruption;
• Notary Fraud;
• Evidence Tampering;
• Theft of Government Services;
• Perjury;
• Felonious Influence of Public Officials;
• Money Laundering;
• Insurance Fraud;
• Securities Fraud;
• Constitutional and Civil Right violations.

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Ah, yes, the banks are truly innovative. Keep this in mind the next time some bank lawyer tries to convince you that all this is “victimless crime”.

OCC Servicer Review Firm Also "Scrubs" Loan Files, Fabricates Documents

Yves Smith, Naked Capitalism

Tuesday, March 6, 2012

(T)here is considerable evidence of a widespread, perhaps pervasive, failure among the parties to mortgage securitizations to adhere to the terms of the contracts that created these deals. Specifically, they were required to transfer the notes (the borrower IOU) through multiple parties and get them to the securitization trust by a specified date. This process was laborious because each time, the note had to be signed (the term of art is “endorsed”) and the mortgage assigned (which confusingly is the lien against the home, although both professionals and laypeople often refer to the note + the mortgage, which are actually two separate instruments, as the mortgage).

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Notes are like checks, they are negotiable instruments. You can’t enforce a copy or use a copy to try to recreate an original. This is exactly the sort of activity that got the notorious DocX shuttered. Yet he seemed to think the use of a copy or a “replacement” adequate. But you can’t “replace” a note; it’s an original, and you need to have the borrower’s signature for it to be binding, and I can guarantee no one is getting borrowers to sign replacement notes.

Similarly, one thing that foreclosure defense attorneys have seen as a huge red flag of servicer chicanery is the use of allonges. An allonge is a separate piece of paper used for endorsements that is required by the Uniform Commercial Code to be “affixed” to the note and used for endorsements when there is no more space left on the note for signatures. Allonges were pretty much never seen until the robosigning scandal, since all the space on a note (meaning the back and the margins) can be used for endorsements.

But SolomonEdwards official said that they’ve been able to get copies of the note from the seller and have been able to “bring them forward with allonges that were re-executed.” When asked, he confirmed that they create allonges now that confirm with the transfers that they’ve found ought to have taken place, either via the PSA, MERS, or other routes. Again, in a securitized trust, that it tantamount to trying to transfer the note now and is not valid. When I pressed him on how they did that, how they got signatures from intermediary parties, he demurred and said, “I don’t want to give away too much of our secret sauce.”

He also discussed using lost note affidavits. That is permissible only on an exception basis; indeed, many deals limited how many lost note affidavits could be used. If a firm like SolomonEdwards is seeing more than a couple of missing notes on a deal, that means transfers did not happen and there is a much more fundamental problem with the securitization, potentially a contract formation failure (if no notes were transferred by the cutoff date, the trust was not formed).

The SolomonEdwards executive also made it clear that he regarded the mortgage assignments as more important than the note, which is backwards (the lien follows the note) and that they spent more time on getting them executed. He said that his firm found “missing” mortgage assignments (“they can’t be found”) to be common. Again, since the assignments had to be completed by the cutoff date, that means they are either making obviously invalid assignments, are deliberately making back-dated assignments (not kosher) or have a time machine.

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In fact, these reviews sound like documentation theater. The partner stressed how through SolomonEdwards was and how they had software that allowed them to record up data items and capture whether a item was material or not material and then risk rate an entire loan file.

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(T)he reality is that there are really only 5-10 things you need to look at: Do you have an original note? Does it have all the endorsements that the PSA says it should have? Do the mortgage assignments correspond to the endorsements? Were they all completed on time?

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It was disconcerting to speak to someone who obviously thinks his firm is highly professional engaged in activities that include document fabrication, which is what creating allonges now amounts to. And the worst is I have no doubt SolomonEdwards is more careful than most firms in the industry. This confirms, as we have said repeatedly, that there was a massive failure in the industry to conform to the requirement of the legal agreements that it devised. And there is a very big business, now with a government seal of approval, in covering up that fact.

“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”.

Wednesday is Ladies’ Day

Katrina vanden Heuvel: Super Tuesday’s big winner is already settled

The polls haven’t closed, but here’s one thing we already know: The big winners of Super Tuesday are the super PACs and big-money politics. In the run-up to Tuesday’s vote, the super PACs’ farcically described “independent expenditures” were far greater than the spending of the candidates’ campaigns.

A Las Vegas billionaire single-handedly has kept Newt Gingrich in the race. Mitt Romney’s “vulture capitalist” biography may raise doubts in some voters’ minds, but it has helped him sweep the money primary. And while Romney has found it hard to win significant support from Republican voters, his “independent” super PAC – Restore Our Future – has used that dough to carpet-bomb with negative ads any opponent who has risen to challenge him.

Laura Flanders:

Three years ago, a worker occupation in Chicago saved a factory and sent up a flare of resistance. Three years on, workers at the same factory are illuminating not only how workers might resist layoffs but also what they might do next.

“Last time it took six days. This time it took about eleven hours.” That’s union representative Leah Fried describing winning another reprieve last week for the factory formerly known as Republic Windows and Doors.

In December 2008, days after receiving a $25 billion federal bailout, Bank of America cut off Republic’s credit, leading management to fire all 250 workers without pay or notice. With layoffs approaching 500,000 a month around the country, Republic’s workers and their union, the militant United Electrical Workers, voted to resist. They occupied the plant and stayed, winning the hearts of downcast Americans everywhere and inspiring even an incoming US president. Bank of America backed down, giving the factory time to find a new buyer, which it did, a company called Serious Energy.

There is bill that is dangerous to your first amendment rights that has moved through Congress and awaits the President’s signature.  The aptly titled, “Screw The First Amendment, You Damned Protesters Get Off My Lawn Act innocuously titled “Federal Restricted Buildings and Grounds Improvement Act of 2011,” has passed the Senate by unanimous consent and the House recorded only 3 votes against it.  There has been virtually no coverage in the mainstream press.

This bill which its sponsor Thomas Rooney (R-Fla) says was written to tighten up restrictions on trespass on the White House grounds is a monument to what a difference one omitted word can make and to the importance of precise language in law.

The revisions would make the law vague and open to exploitative interpretation that would effectively outlaw protest not only near persons or locations protected by the Secret Service (presidents, vice presidents, presidential Candidates, foreign dignitaries, etc.) but also at events vaguely described as, “special events of national significance.”  

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.

March 7 is the 66th day of the year (67th in leap years) in the Gregorian calendar. There are 299 days remaining until the end of the year.

On this day in 1976, a group of 600 civil rights marchers are forcefully broken up in Selma, Alabama. This day would be remembered in the Civil Rights Movement as “Bloody Sunday”

The Selma to Montgomery marches were three marches in 1965 that marked the political and emotional peak of the American civil rights movement. They grew out of the voting rights movement in Selma, Alabama, launched by local African-Americans who formed the Dallas County Voters League (DCVL). In 1963, the DCVL and organizers from the Student Nonviolent Coordinating Committee (SNCC) began voter-registration work. When white resistance to Black voter registration proved intractable, the DCVL requested the assistance of Martin Luther King, Jr. and the Southern Christian Leadership Conference, who brought many prominent civil rights and civic leaders to support voting rights.

The first march took place on March 7, 1965 – “Bloody Sunday” – when 600 civil rights marchers were attacked by state and local police with billy clubs and tear gas. The second march took place on March 9. Only the third march, which began on March 21 and lasted five days, made it to Montgomery, 51 miles away.

The marchers averaged 10 miles a day along U.S. Route 80, known in Alabama as the “Jefferson Davis Highway”. Protected by 2,000 soldiers of the U.S. Army, 1,900 members of the Alabama National Guard under Federal command, and many FBI agents and Federal Marshals, they arrived in Montgomery on March 24, and at the Alabama Capitol building on March 25.

The route is memorialized as the Selma To Montgomery Voting Rights Trail, a U.S. National Historic Trail.

Selma essentially became the focus the right to vote marches because it was the seat of Dallas County, AL that although it has a black population of 57% with 15,000 blacks elegible to vote, there were only 130 registered. Efforts to register voters were blocked by state and local officials, the White Citizens’ Council, and the Ku Klux Klan, using a literacy test, economic pressure, and violence.

On July 2, 1964, President Lyndon B. Johnson signed the Civil Rights Act of 1964 into law, which declared segregation illegal, yet Jim Crow remained in effect. When attempts to integrate Selma’s dining and entertainment venues were resumed, blacks who tried to attend the movie theater and eat at a hamburger stand were beaten and arrested.

On July 6, John Lewis led 50 blacks to the courthouse on registration day, but Sheriff Clark arrested them rather than allow them to apply to vote. On July 9, Judge James Hare issued an injunction forbidding any gathering of three or more people under the sponsorship of civil rights organizations or leaders. This injunction made it illegal to even talk to more than two people at a time about civil rights or voter registration in Selma, suppressing public civil rights activity there for the next six months.

Planning the First March

With civil rights activity blocked by Judge Hare’s injunction, the DCVL requested the assistance of King and the Southern Christian Leadership Conference (SCLC). Three of SCLC’s main organizers – Director of Direct Action and Nonviolent Education James Bevel, Diane Nash, and [http://en.wikipedia.org/wiki/James_Orange James Orang, who had been working on Bevel’s Alabama Voting Rights Project since late 1963, a project which King and the executive board of SCLC had not joined. When SCLC officially accepted Amelia Boynton’s invitation to bring their organization to Selma, Bevel, Nash, Orange and others in SCLC began working in Selma in December 1964. They also worked in the surrounding counties along with the SNCC staff who had been active there since early 1963.

The Selma Voting Rights Movement officially started on January 2, 1965, when King addressed a mass meeting in Brown Chapel in defiance of the anti-meeting injunction.

Over the following weeks, SCLC and SNCC activists expanded voter registration drives and protests in Selma and the adjacent Black Belt counties. In addition to Selma, marches and other protests in support of voting rights were held in Perry, Wilcox, Marengo, Greene, and Hale counties.

On February 18, 1965, an Alabama State Trooper, corporal James Bonard Fowler, shot Jimmie Lee Jackson as he tried to protect his mother and grandfather in a café to which they had fled while being attacked by troopers during a nighttime civil rights demonstration in Marion, the county seat of Perry County. Jackson died eight days later, of an infection resulting from the gunshot wound, at Selma’s Good Samaritan Hospital.

In response, James Bevel called for a march from Selma to Montgomery.

Goals of the March

Bevel’s initial plan was to march to Montgomery to ask Governor George Wallace if he had anything to do with ordering the lights out and the state troopers to shoot during the march in which Jackson was killed. Bevel called the march in order to focus the anger and pain of the people of Selma, some of whom wanted to address Jackson’s death with violence, towards a nonviolent goal. The marchers also hoped to bring attention to the violations of their rights by marching to Montgomery. Dr. King agreed with Bevel’s plan, and asked for a march from Selma to Montgomery to ask Governor Wallace to protect black registrants.

Wallace denounced the march as a threat to public safety and declared he would take all measures necessary to prevent this from happening.

The First March: “Bloody Sunday”

On March 7, 1965, 525 to 600 civil rights marchers headed east out of Selma on U.S. Highway 80. The march was led by John Lewis of SNCC and the Reverend Hosea Williams of SCLC, followed by Bob Mants of SNCC and Albert Turner of SCLC. The protest went smoothly until the marchers crossed the Edmund Pettus Bridge and found a wall of state troopers waiting for them on the other side. Their commanding officer told the demonstrators to disband at once and go home. Williams tried to speak to the officer, but the man curtly informed him there was nothing to discuss. Seconds later, the troopers began shoving the demonstrators. Many were knocked to the ground and beaten with nightsticks. Another detachment of troopers fired tear gas. Mounted troopers charged the crowd on horseback.

Brutal televised images of the attack, which presented people with horrifying images of marchers left bloodied and severely injured, roused support for the U.S. civil rights movement. Amelia Boynton was beaten and gassed nearly to death; her photo appeared on the front page of newspapers and news magazines around the world Seventeen marchers were hospitalized, leading to the naming of the day “Bloody Sunday”.

I have even less interest in this edition of the Insane Clown Posse than most (if that were possible).  I’ll have neither the time nor inclination to join you.  If you insist on playing along with Mitt there’s a place to scribble below.

You may well ask what those fancy +3s are.  Those are delegates chosen outside the normal selection process and will not be decided tonight.