Chicago Alderman Edward Burke, chairman of the city finance committee, scheduled the hearing this week. According to a city council document, Burke sees a chance the idea could clear legal hurdles.
“Legal experts have opined that government entities may use eminent domain to acquire mortgages so long as certain legal standards are met,” according to the document.
More than 44% of the homes in surrounding Cook County back are worth less than the mortgage. According to the city, local homeowners lost more than $37 billion in equity since the housing market crashed.
The San Bernardino proposal would affect less than 1.5% of private-label security loans in the area as the mortgages are bought out of pools. Investors are concerned, the idea would spread, with some arguing that the iniative may acutally do more harm than good.
The former Chief Executive and Chairman of Anglo Irish Bank has appeared in court in Dublin charged in connection with financial irregularities at the bank. Seán FitzPatrick was charged with 16 offences [sic] under Section 60 of the Companies Act.
Tim Geithner claims he learned of Libor manipulation when the rest of us commoners did, in 2008. New evidence keeps coming out suggesting he should have known much, much earlier.
The latest example — which puts the earliest time-stamp on Libor manipulation we’ve seen yet — is a Financial Timesop-ed by former Morgan Stanley trader Douglas Keenan. He claims that Libor, a key short-term bank lending rate that affects mortgages and other interest rates throughout the economy, was being jerked around for fun and profit as long ago as 1991.
Let that sink in for just a minute: Libor was being manipulated 17 years before the financial crisis and Geithner’s babe-in-the-woods discovery of it, according to Keenan. Geithner wasn’t in charge of the New York Fed at the time, but if this was widespread knowledge years before his arrival, it makes you wonder how he could not have heard about it for so long.
July 25, 2012 Mary Schapiro Chairman Securities Exchange Commission 100 F Street, N.E. Washington, D.C. 20549
Re: Sarbanes-Oxley Enforcement Action against JP Morgan CEO Jamie Dimon
Dear Madam:
Occupy the SEC (“OSEC”) is a group within the New York-based Occupy Wall Street (“OWS”)protest movement. We are writing to urge the SEC to aggressively pursue Sarbanes-Oxley(“SOX”) law violations against JPMorgan Chase (“JPM”).
Public information, including Jamie Dimon’s own testimony at the recent House and Senate banking subcommittee hearings, provides strong evidence of probable violations of Sarbanes- Oxley by Mr. Dimon and JPMorgan. We expect that a thorough investigation by the SEC will confirm that SOX violations occurred and that SOX enforcement actions against the bank and its executives are appropriate. We are particularly concerned that SOX violations were missing from the list of disclosure failures that the SEC is currently investigating according to your House subcommittee appearance on June 19, 2012.
In a rare legal counter move, Charlotte, N.C.-based Bank of America (NYSE: BAC) has filed a lawsuit against Nashville’s Chapter 13 bankruptcy trustee.
It’s the first time in recent Tennessee history that a large lender has sued a trustee of the court, according to a local bankruptcy attorney.
The move marks an effort on behalf of the bank to put an end to a common defense tactic used by debtors and foreclosure judges in the aftermath of the mortgage meltdown. Known as “show me the note,” the tactic forces a lender to offer up physical documentation that they actually own the mortgage.
This week, U.S. District Judge Marsha Pechman in Seattle denied a defendant’s motion for summary judgment in a class action over Washington Mutual mortgage-backed securities, clearing the way for a trial on Sept. 17. Plaintiffs’ attorney Steven Toll of Cohen Milstein Sellers & Toll, who says damages could be as high as $550 million, insists that the trial will go ahead. “All efforts to resolve the case have been unsuccessful so far,” he said. “If any case is likely to go to trial, this is it.”
Despite what Toll says, that seems unlikely, given how rarely securities fraud cases go to trial. The short history of MBS class action settlements suggests that JPMorgan, which now owns the WaMu entities that issued the mortgage-backed notes, could get out of the case for much less than the damages the investors are seeking. In their settlements, Wells Fargo, Deutsche Bank and Merrill Lynchhave paid between $2.70 and $12.80 per initial $1,000 in certificate value. We will find out whether an MBS class action Goldman Sachs agreed to settle on July 18 falls into that range when terms become public next Wednesday.
Phil Gramm, the former U.S. senator who helped write the 1999 law that enabled the creation of financial giants such as Citigroup Inc. (C) and Bank of America Corp., said his legislation didn’t make the system any riskier.
The Gramm-Leach-Bliley Act repealed the 1933 prohibition against federally insured depository institutions combining with securities firms and insurers. While his law allows deposit- taking banks to affiliate with securities firms through holding companies, depositors and taxpayers are protected because affiliates can’t take capital out of the banks, Gramm said in a telephone interview yesterday.
“I don’t see any evidence that allowing them to affiliate through holding companies had anything to do with the financial crisis nor has anybody ever presented any evidence to suggest that it did,” said Gramm, 70. Companies that failed such as Lehman Brothers Holdings Inc. “tended to be narrowly focused.”
That’s as good a place to start this post as any. Congress and the Administration have been co-opted — bought and paid for. Financial regulation is a joke and fraud is a business model and seen as standard operating procedure. Fines are so ridiculously non-punitive that they not only don’t serve as punishment, but may actually incentivize crime.
The most effective way to restrict democracy is to transfer decision-making from the public arena to unaccountable institutions: kings and princes, priestly castes, military juntas, party dictatorships, or modern corporations.
If I was them I would focus on the LIBOR mess that will most likely use tons of resources.
California via Reuters–
In a case that illustrates the mounting risks facing cash-strapped California cities and their lenders, the desert city of Victorville is bracing for possible litigation amid allegations that it improperly shifted funds among different city-controlled entities.
The Victorville city council was told by its attorney last week that it faced “significant exposure to litigation” relating to a little-publicized Securities and Exchange Commission investigation into its financial practices, the city attorney acknowledged in a statement to Reuters.
City attorney Andre de Bortnowsky denied that Victorville had violated any laws, and said “it almost appears as if the SEC is on a fishing expedition.”
Miami via Reuters–
Two years ago, the Securities and Exchange Commission brought its first-ever enforcement action against a state, accusing New Jersey of deceiving municipal bond investors about the state’s unfunded pension liabilities. The case was a wake-up call. Bloomberg predicted a wave of similar SEC suits against muni bond issuers, the National Association of Bond Lawyers convened a task force pension obligation disclosure, and the enforcement bar braced for action.
And then … nothing. Well, not exactly nothing. In October 2010 the SEC’s municipal securities unit announced a settlement with two officials from San Diego, in a case that dated back to the commission’s 2008 settlement with the city for underreporting pension liability to bond investors. There were reports of SEC investigations of bonds issued by the city of Victorville, California, and of California’s disclosure of obligations to its gigantic public employees’ pension fund. The SEC also worked with the Justice Department on its municipal bond bid-rigging case against several major banks, and reached its own $51.2 million muni bond bid-rigging settlement with JPMorgan Chase in 2011. But the expected wave of enforcement actions didn’t materialize. “Candidly, I expected to see a lot more,” said Thomas Gorman of Dorsey and Whitney, who writes the SEC Actions blog. “These are complicated cases and they take a long time, but it’s been a while.”
Those wondering why the Department of Justice has refused to go after Jon Corzine for the vaporization of $1.6 billion in MF Global client funds need look no further than the documents uncovered by the Government Accountability Institute that reveal that the now-defunct MF Global was a client of Attorney General Eric Holder and Assistant Attorney General Lanny Breuer’s former law firm, Covington & Burling.
There’s more.
Records also reveal that MF Global’s trustee for the Chapter 11 bankruptcy retained as its general bankruptcy counsel Morrison & Foerester–the very law firm from which Associate Attorney General Tony West came to DOJ.
H/T & Congratulations to Nye Lavalle & Attorney Jacqulyn Mack
Thank you Judge Lazarra!
.
UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION
ELIZABETH H. COURSEN, Plaintiff,
v.
JP MORGAN CHASE & CO., et al., Defendants.
O R D E R
THIS CAUSE comes before the Court on Defendant Fidelity National Financial, Inc.’s (“FNF”) Motion to Dismiss Plaintiff’s First Amended Complaint and Plaintiff’s Response in Opposition.1 FNF moves to dismiss Plaintiff’s First Amended Complaint, pursuant to Rule 12(b)(6), Federal Rule of Civil Procedure, on grounds that: (1) FNF is not a proper party Defendant to this action because Plaintiff failed to seek and obtain leave to add additional parties and failed to adequately allege any direct or indirect liability on the part of FNF and (2) each of the counts in Plaintiff’s complaint fails to state a claim upon which relief may be granted. After careful consideration of the parties’ submissions, together with the well-pleaded allegations of Plaintiff’s First Amended Complaint, the Court concludes the motion is due to be denied.
Background Facts & Allegations
On or about September 27, 2001, Plaintiff, Elizabeth H. Coursen (“Plaintiff”), executed and delivered a promissory note (the “Note”) and a mortgage (the “Mortgage”) to North American Mortgage Company. Defendant Washington Mutual Bank (“WaMu”) became the holder of the Note and Mortgage, as successor to North American Mortgage Company, and it assigned the Mortgage to Defendant Federal National Mortgage Corporation (“Fannie Mae”) in 2003. Fannie Mae filed a complaint in the Twelfth Judicial Circuit Court in Sarasota County, Florida, seeking foreclosure of the Mortgage against Plaintiff on April 23, 2003, in the case of Federal National Mortgage Association v. Elizabeth H. Coursen, et. al., Case No.: 2003-CA-005846 NC (“the 2003 Foreclosure Case”), which was eventually dismissed.
On or about October 31, 2006, Fannie Mae assigned the Mortgage back to WaMu as attorney-in-fact for Fannie Mae. WaMu determined that Plaintiff had defaulted on her loan payments in 2006, and as a result, filed a foreclosure action against Plaintiff on or about September 13, 2006, in the case of Washington Mutual Bank v. Elizabeth H. Coursen, et. al., Case No.: 2006-CA-008521 NC (“the 2006 Foreclosure Case”).
WaMu received a final judgment of foreclosure in the 2006 Foreclosure Case on or about November 27, 2006 (“the Final Judgment”). In the 2006 Foreclosure Case, WaMu filed the original Note, which reflected a blank endorsement. In 2008, Defendants JP Morgan Chase & Co. and JPMorgan Chase Bank, N.A. (collectively “Chase”) acquired WaMu and subsequently became holder of the Note and Mortgage. Following several failed attempts to settle the 2006 Foreclosure Case through loss mitigation efforts, and following several pleadings filed by Plaintiff in an attempt to remain in the property without making mortgage payments, the foreclosure sale was eventually rescheduled for November 14, 2011.
Plaintiff filed a Motion to Vacate Judgment on or about September 27, 2011. The state court denied the motion on October 24, 2011, for lack of jurisdiction. Plaintiff subsequently filed a Motion for Rehearing on or about November 3, 2011, which was denied. At the foreclosure sale on November 14, 2011, the subject property was sold to Chase. Plaintiff subsequently filed her Objection to Sale, not raising any irregularity in the sale or inadequacy of the sale price. In response, Chase filed a Motion to Strike the Objection to Sale, which was granted on March 6, 2012.
Plaintiff filed a Complaint solely against JP Morgan Chase & Co. in state circuit court on August 18, 2010, based upon allegations that Defendant lacked standing and committed fraud in pursuit of the foreclosure. On August 18, 2011, the Complaint was dismissed with leave to amend, for failure to state the fraud claims with particularity. On September 27, 2011, Plaintiff filed a motion to vacate judgment in the 2006 mortgage foreclosure, which was denied on October 24, 2011. She sought rehearing on November 3, 2011, and her motion was denied. The final sale of the property took place on November 4, 2011, and a certificate of title was issued to Chase. Plaintiff filed an objection to the sale, which was struck on March 6, 2012, because the motion failed to raise any irregularity in the sale or inadequacy of the sale price.
Plaintiff then filed her First Amended Complaint on or about March 6, 2012, in which she seeks relief through five counts for violations of FDUTPA (Count I); violations of the FDCPA and the FCCPA (Count II); for civil conspiracy (Count III); for abuse of legal process (Count IV); for damages and declaratory relief under 18 U.S.C. § 1961, 18 U.S.C. § 1962(b), and 18 U.S.C. § 1964 (Count V). (Dkt. 2.) She added Defendants FNF, JPMorgan Chase Bank, N.A., WaMu, Fannie Mae, Shapiro & Fishman, GP, Fidelity National Default Solutions (“FNDS”), Fidelity National Information Services (“FNIS”), Inc., Lender Processing Services, Inc. (“LPS”), Lender Processing Services Default Solutions, Inc. (“LPSDS”), DocX, and Dory Goebel (“Goebel”), as Defendants. Defendants Chase, WaMu, and Fannie Mae removed the case to this Court on March 30, 2012. (Dkt. 1.)
Standard for Dismissal
In determining whether to grant a Rule 12(b)(6) motion, the Court shall not dismiss a complaint if it includes “enough facts to state a claim for relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L.Ed.2d 929 (2007) (dismissing complaint because plaintiffs had not “nudged their claims across the line from conceivable to plausible”). The Court “must view the complaint in the light most favorable to the plaintiff and accept all of the plaintiff’s wellpleaded facts as true.” American United Life Ins. Co. v. Martinez, 480 F.3d 1043, 1057 (11th Cir. 2007). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, (citations omitted), a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S. Ct. at 1964-65. To survive a motion to dismiss under Twombly, a complaint’s factual allegations, if assumed to be true, “must be enough to raise the right to relief above the speculative level.” Id. Plaintiff meets her burden under Twombly.
Discussion
FNF argues that it is not a proper party to this action. At the outset, FNF asserts that Plaintiff failed to seek and obtain leave to add FNF as a party Defendant. However, under Rule 1.190(a), Florida Rules of Civil Procedure, leave of court or the consent of the opposing party prior to adding additional parties is not required when a responsive pleading has not been filed in the case. At the time that Plaintiff amended the complaint, no responsive pleading had yet been filed. The sole Defendant had only filed a motion to dismiss. A motion to dismiss is not considered a “responsive pleading” because it is not a “pleading” under Rule 1.100(a) of the Florida Rules of Civil Procedure and, therefore, Plaintiff’s absolute right to amend the complaint “once as a matter of course” had not terminated. Boca Burger, Inc. v. Forum, 912 So. 2d 561 (Fla. 2005).
FNF next asserts that Plaintiff fails to sufficiently allege FNF’s liability. Plaintiff does, however, allege that FNF, as well as FNDS, LPS, FNIS, LPSDS, and DocX, employed the individuals whose illegal acts proximately caused her to suffer the loss of her homestead through a wrongful foreclosure. (Dkt. 2, ¶¶ 16-18.) Further, Plaintiff sets out the following allegations of FNF’s vicarious liability:
-FNF is the parent company of FNDS at all times material. (Dkt. 2, ¶11.) -FNF acquired LPS a/k/a FNIS in 2003, and was its parent until 2008. (Id. at ¶13.) -LPSDS is an alter ego of LPS. (Id. at ¶14.) -DocX is/was a wholly owned a subsidiary of LPS and/or LPSDS. (Id. at ¶15.) -Defendant Dory Goebel (“Goebel”) is an employee of all, or some, of the aforesaid entities. (Id. at ¶16.) -Goebel violated Fla. Stat. § 817.54 and § 831.06 by executing an Affidavit of Indebtedness as “AVP Washington Mutual Bank” on October 23, 2006, in the 2006 foreclosure action. (Id. at ¶18(a).) -At all times material hereto FNF and/or FNDS and/or FNIS/LPS and/or LPSDS and/or DocX were instrumentalities of each other and they engaged in improper conduct by failing to:
a. Observe corporate formalities; b. By commingling funds; c. By commingling assets; d. By failing to adequately capitalize; e. By using either corporate form to avoid liability for the other; f. By actively conspiring to defraud Plaintiff of her homestead real property in violation of her constitutional rights. (Id. at ¶17.)
Under Florida law, the corporate veil will only be pierced to prevent fraud or injustice. Eckhardt v. U.S., 463 F.App’x 852, 855 (11th Cir. 2012) (unpublished) (citing Dania Jai-Alai Palace, Inc. v. Sykes, 450 So. 2d 1114, 1121 (Fla. 1984)). Piercing the corporate veil is proper if the corporation “is a mere device or sham to accomplish some ulterior purpose, or is a mere instrumentality or agent of another corporation or individual owning all or most of its stock, or where the purpose is to evade some statute or to accomplish some fraud or illegal purpose.” Eckhardt 463 F.App’x at 855 (quoting Aztec Motel, Inc. v. Faircloth, 251 So. 2d 849, 852 (Fla. 1971)). To pierce the corporate veil in Florida, a claimant must establish: (1) the shareholder dominated and controlled the corporation to such an extent that the corporation’s independent existence was in fact non-existent and the shareholders were in fact alter egos of the corporation; (2) the corporate form must have been used fraudulently or for an improper purpose; and (3) the fraudulent or improper use of the corporate form caused injury to the claimant. Eckhardt, 463 F.App’x at 855-56 (quoting Gasparini v. Pordomingo, 972 So. 2d 1053, 1055 (Fla. Dist. Ct. App. 2008)).
Plaintiff’s allegations sufficiently plead these factors for vicarious liability on the part of FNF. The Court also takes judicial notice of the Securities and Exchange Commission filings that Plaintiff provided to support her allegations that the LPS Defendants are instrumentalities of each other and to devise her flow chart demonstrating the corporate hierarchy of the LPS Defendants. (See Dkt. 40; Dkt. 39, p. 6.) Therefore, the First Amended Complaint, taken as true, sufficiently establishes FNF as a proper Defendant for purposes of this Rule 12(b)(6) dismissal proceeding. Whether Plaintiff’s allegations can be proven is a question of fact that must be determined after discovery.
FNF also challenges Plaintiff’s claim against it for violation of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), Fla. Stat. § 501.204(1)(2001), for failure to state a claim upon which relief may be granted. A claim for damages under FDUTPA has three elements: (1) a deceptive act or unfair practice; (2) causation; and (3) actual damages. Virgilio v. Ryland Group, Inc., 680 F.3d 1329, 1338 n.25 (11th Cir. 2012) (quoting Rollins, Inc. v. Butland, 951 So. 2d 860, 869 (Fla. Dist. Ct. App. 2006)). Here, Plaintiff alleges that Defendants, including FNF, violated FDUTPA by using fake identities and manufactured documents to deprive her of her homestead through foreclosure of a debt that was not in default2 prior to inception of the foreclosure cases. (Dkt. 2, pp. 16-19.) The First Amended Complaint identifies FNF as the parent company of the other LPS Defendants and alleges that FNF is liable for the alleged fraudulent acts that caused her to lose her homestead. Plaintiff’s allegations are sufficient to withstand a Rule 12(b)(6) dismissal. She must afforded the opportunity to prove the allegations through the discovery process.
FNF further argues that Plaintiff fails to state a clam under the Fair Debt Collection Practices Act (“FDCPA”) because FNF was neither owed any part of the loan debt nor did it attempt to collect any money from Plaintiff on the loan in question. Notwithstanding, 15 U.S.C. §1692(a)(6) defines the term “debt collector” to include any person who uses an instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. Plaintiff alleges that FNF, through its alleged alter ego, FNDS, “supplies record-keeping and litigation support for actions brought to foreclose mortgages in Florida, including the preparation and verification of multitudinous affidavits which are filed with various court clerks in Florida.” (Dkt. 2, ¶11.) She also alleges that Goebel oversees a section of individuals who produce thousands of sworn affidavits a day for filing in state and federal litigation brought by FNF clients and several boilerplate documents used in the foreclosure of Plaintiff’s home. (Id. at ¶16.) Furthermore, under 15 U.S.C. § 1692f, “[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Subparagraph (6) of that section specifically prohibits taking or threatening to take any nonjudicial action to effect dispossession or disablement of property … if there is no present right to possession of the property claimed as collateral through an enforceable security interest. As previously discussed, Plaintiff alleges that Defendants fabricated documents in furtherance of a conspiracy to unlawfully divest Plaintiff of her homestead. Consequently, this Court must find that Plaintiff’s allegations present a question of fact as to whether FNF’s activities violated the FDCPA, and she must be allowed the opportunity to establish those facts through the course of discovery.
Questions of fact preclude dismissal of Plaintiff’s claim under the Florida Consumer Collection Practices Act (“FCCPA”), Chapter 559, Florida Statutes, as well, because she plainly alleges that Defendants, including FNF, knew they did not have the legal right to collect the alleged debt and created manufactured evidence and sham pleadings to do so. (Dkt. 2, ¶¶18-19.) Section 559.72, Florida Statutes, provides that “no person shall” do any of the 19 enumerated items, including collecting a debt which is not owed or is the result of a “manufactured default.” Section 559.72(9) requires that Plaintiff must show that FNF asserted a legal right that did not exist, with actual knowledge that the right did not exist. For these reasons, Plaintiff’s allegations in support of her FCCPA claim are sufficient to overcome a Rule 12(b)(6) dismissal.
Plaintiff’s civil conspiracy claim requires that she prove: (a) the existence of an agreement between two or more parties; (b) to do an unlawful act or to do a lawful act by unlawful means; (c) the doing of some overt act in pursuance of the conspiracy; and (d) damage to Plaintiff as a result of the acts done under the conspiracy. Olson v. Johnson, 961 So. 2d 356, 359 (Fla. Dist. Ct. App. 2007). A cause of action for abuse of process requires a showing of willful or intentional misuse of process for some wrongful or unlawful object, or ulterior purpose not intended by law. Peckins v. Kaye, 443 So. 2d 1025, 1026 (Fla. Dist. Ct. App. 1983) (citing Cline v. Flagler Sales Corp., 207 So. 2d 709 (Fla. Dist. Ct. App. 1968)). Plaintiff is able to overcome dismissal of her common law claims for civil conspiracy and abuse of process at this stage of the proceedings through her factual allegations that Defendants acted unlawfully, and in agreement, with the intent to defraud her through the use of sham documents and fabricated evidence, and that their actions caused her damages. (Dkt. 2, ¶¶6-13, 18(e), 23.)
Finally, Plaintiff’s civil RICO claim under 18 U.S.C. § 1962 alleges facts that, at least for purposes of a Rule 12(b)(6) dismissal, are adequate to support each of the statutory elements for the predicate acts that allegedly divested her of her homestead. See Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 949 (11th Cir. 1997) (holding that in order to survive a motion to dismiss, a plaintiff must allege facts sufficient to support each of the statutory elements for at least two of the pleaded predicate acts) (citing Central Distribs. of Beer, Inc. v. Conn, 5 F.3d 181, 183-84 (6th Cir. 1993)). Plaintiff alleges that Defendants unlawfully employed the United States mail, Florida state courts, and perjured and fabricated evidence to divest her of her homestead. (Dkt. 2, ¶¶1-16.) She alleges that Defendants were the principals of, or participated in, the operation or management of the enterprise itself and that the pattern of racketeering included at least two acts, transmission through the use of the mail of fake Assignments of Mortgage and fictitious corporate signatures. (Id. at ¶¶6-12.) Furthermore, Plaintiff’s civil RICO claim is not time-barred inasmuch as Plaintiff asserts that she was prevented from discovering that she was the victim of fraud by Defendants’ concealment of the alleged fraud.
ACCORDINGLY, it is ORDERED AND ADJUDGED:
Defendant Fidelity National Financial, Inc.’s Motion to Dismiss Plaintiff’s First Amended Complaint (Dkt. 28) is denied. Defendant shall file its answer and any defenses to the First Amended Complaint within ten (10) days of this Order.
DONE AND ORDERED at Tampa, Florida, on July 25, 2012.
s/Richard A. Lazzara RICHARD A. LAZZARA UNITED STATES DISTRICT JUDGE
Timothy Geithner claimed on Wednesday that the government had no choice during the financial crisis but to lend to banks and AIG using an interest rate, Libor, that everybody knew was flawed.
Call it a back-door bailout: By using an artificially low Libor, the government saved the banks and AIG millions, maybe billions — and cost the taxpayers the same amount.
The use of Libor in the bailouts also rubber-stamped that hopelessly manipulated interest rate as a market measure, raising still more questions about just how worried Geithner and other regulators really were about it.
In a House Financial Services Committee hearing on Wednesday, Treasury Secretary Geithner was asked why Treasury and the Fed used the London Interbank Offered Rate as a basis for loans to insurance giant American International Group and to U.S. banks under the Term Asset-Backed Securities Loan Facility — even though Geithner and other regulators had long suspected that Libor was artificially low, as Geithner testified.
Last week, when I wrote about the impact of Syncora’s $375 million settlement with Bank of America, I had a bit of an existential crisis. Sources kept telling me that the mortgage-backed securities litigation between the bond insurer and Countrywide was more of a sideshow than the main event, and that business considerations, not developments in the breach-of-contract case, drove the settlement. You can imagine how that made me feel, considering the brain cells I’ve sacrificed to coverage of monoline put-back litigation. Has all this fulmination — not just by me, but by dozens of lawyers getting paid millions for their trouble — been for naught?
I still don’t know the answer, but I’ve perked up again, thanks to a letter MBIA’s lawyers at Quinn Emanuel Urquhart & Sullivan sent to New York State Supreme Court Justice Eileen Bransten on Wednesday afternoon. Quinn Emanuel wants Bransten’s permission to file a motion to lift the seal on expert reports, deposition testimony by bank executives and the documents accompanying the reports and depositions. It’s a purely tactical play by MBIA, but the letter is a reminder that litigation occasionally shines a megawatt light on information that businesses would rather keep locked away in a dark closet.
Rep. Alan Grayson asks the Federal Reserve Inspector General about the trillions of dollars lent or spent by the Federal Reserve and where it went, and the trillions of off balance sheet obligations. Inspector General Elizabeth Coleman responds that the IG does not know and is not tracking where this money is.
If I rob a federally insured bank and make off with $20,000, I’m facing years of federal prison time. If I defraud federal insurance programs, be they FHA or Medicaid, I’m also facing years of prison. If I engage in insider trading, I could also be looking at prison time (although that’s pretty rare).
But if I rig the most widely used interest rate index in the world, a leading bank regulator doesn’t think that the Department of Justice needs to be notified because they’re not part of the regulatory working group focused on LIBOR. That was Timothy Geithner’s explanation today as to why he didn’t notify the DOJ when he learned of Barclay’s LIBOR fraud. For real? What’s next? The dog ate my homework?
It all leaves me scratching my head. The harm from the LIBOR rigging is massively greater than any of the other financial crimes for which we send people to prison. Why wouldn’t the then head of the NY Federal Reserve Bank think that this was potentially a criminal matter? The “not part of the working group” is just about the lamest excuse I can think of. I don’t normally talk to the police, but I call them if I think there’s a crime in progress.
So perhaps Geithner simply didn’t think the wrongdoing was criminal or even potentially criminal. How is that possible? My hypothesis is that it simply isn’t comprehensible to Geithner that senior executives in financial institutions could be engaged in criminal behavior. Criminals don’t wear suits. They use six-guns, not fountain pens. Perhaps many bank regulators are simply too cozy with bankers to see them as even potentially criminal. They might have gone to college together. They interact regularly and their careers are intertwined. They may be part of the same social milieu and may even socialize. Institutions might get fined (without admitting any wrongdoing), but criminal penalties? Not for these kind of people.
Former Citigroup Chairman & CEO Sanford I. Weill, the man who invented the financial supermarket, called for the breakup of big banks in an interview on CNBC Wednesday.
“What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail,” Weill told CNBC’s “Squawk Box.”
He added: “If they want to hedge what they’re doing with their investments, let them do it in a way that’s going to be mark-to-market so they’re never going to be hit.”
He essentially called for the return of the Glass–Steagall Act, which imposed banking reforms that split banks from other financial institutions such as insurance companies.
H.R. 459 does not limit the focus of the audit, making a full audit possible. An entity that controls the value and purchasing power of the dollar should not be permitted to operate in the dark and now H.R. 459 will provide this. Approved on a vote of 327 to 98.
The Bill now heads to the Senate where it is likely to not go as planned.
Treasury Secretary Timothy Geithner will testify before the House Financial Services Committee, Wednesday, about his agency’s annual report authored by the Financial Stability Oversight Council (FSOC).
The Council, created under the Dodd-Frank financial reform law, released its 2012 Annual Report last week. The report gives a review of the policies in the 2000s that led to the financial crisis. It also provides an overview of the vulnerabilities and potential threats to the financial markets and how the agency plans to detect them early.
Among other findings, the report states that the nation’s financial system has rebounded since 2009, but still faces challenges due to stress in Europe.
This, the Council’s second annual report, is part of an ongoing process by the U.S. government to identify, interpret and mitigate future problems to financial stability. Two years ago, President Obama signed consumer protection laws in response to the 2008 financial crisis.
The Treasury Secretary is also set to appear before the Senate Banking Committee Thursday on the FSOC’s annual report.
Asked by Rose about the Barofsky book and the suggestion that he was too close to the banks as a result of his time heading the New York Federal Reserve, Geithner pushed back.
“You know, I’m deeply offended by that,” Geithner said. “I find that deeply offensive. You know, it’s the result of a urban myth. … A lot of people thought and wrote in publications of record that I spent my life at Goldman Sachs rather than as a public servant, which is what I’d done with my life. A lot of people thought the Federal Reserve Bank of New York was a bank — a private bank — rather than the fire station of the financial system.”
For Dominick Vulpis, a $140 sewer bill has become a $50,000 nightmare.
Vulpis didn’t know he had a big problem with the four-year-old bill until last December, he said, when he was served with papers notifying him that he had lost his Middletown, N.J., home to foreclosure. Neither he nor his wife were notified of the foreclosure process until the final judgment was granted last December, he said.
“It was never brought to my attention until it was too late and we were served with papers saying we had to move out of our house,” said Vulpis, a 60-year-old plumber. “I may pay a bill late, but I pay them. I’m not trying to beat anyone for $140.”
“At least 15,000 instances of financial institutions failing to properly reduce servicemembers’ mortgage interest rates and over 300 improper foreclosures have been identified by federal investigations and financial institutions in recent years,” the GAO said in its report.
Furthermore, the GAO noted that although the U.S. Department of Justice (DOJ) has explicit SCRA enforcement authority, it has only brought three cases against mortgage servicers for SCRA violations during the past five years.
Okay, let’s pull out our handy-dandy calculators and try to add that up. At least 15,000 cases of improper SCRA-related mortgage interest-rate reductions, plus over 300 improper foreclosures against military personnel and their families who are supposed to be protected by SCRA equals…three DOJ-generated lawsuits? That doesn’t seem to add up, eh?
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