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Helping Homeowners Harmed by Foreclosures: Ensuring Accountability and Transparency in Foreclosure Reviews Written Testimony of Alys Cohen

Helping Homeowners Harmed by Foreclosures: Ensuring Accountability and Transparency in Foreclosure Reviews Written Testimony of Alys Cohen


Helping Homeowners Harmed by Foreclosures:
Ensuring Accountability and Transparency in Foreclosure Reviews

Written Testimony
of
Alys Cohen

National Consumer Law Center
also on behalf of
Community Legal Services of Philadelphia, Connecticut Fair Housing Center, Consumer Action,
Consumers Union, Empire State Justice Center, Financial Protection Law Center, Housing and
Economic Rights Advocates, Legal Aid Center of Southern Nevada, Inc., Michigan Foreclosure
Task Force, National Association of Consumer Advocates, National Council of La Raza, National
Community Reinvestment Coalition, National Fair Housing Alliance, National People’s Action,
Neighborhood Economic Development Advocacy Project, North Carolina Justice Center

Before the United States Senate Subcommittee on
Housing, Transportation, and Community Development of the
United States Senate Committee on
Banking, Housing, & Urban Affairs

Dec. 13, 2011

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FHA Bailout Coming, Faces $50 Billion in Loses – WE WERE ALWAYS RIGHT!

FHA Bailout Coming, Faces $50 Billion in Loses – WE WERE ALWAYS RIGHT!


We always knew this was coming, They always knew this was coming and they always knew the taxpayers were going to pick up yet another Ponzi Tab to another brilliant sub-prime cover up!

FOX BUSINESS-

We said it was the Federal Housing Administration, which sells lenders a 100% guarantee against defaults on home mortgages typically for lower income people. FHA has seen defaults skyrocket on these loans.

But the Federal Housing Administration fought us vigorously on our story. So did liberal economic research groups.

Turns out they were wrong.

As the FHA is now set to soon release its annual report, the University of Pennsylvania’s Wharton School estimates that the FHA faces around $50 billion in losses in coming years.

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Ranking Member Cummings Addresses New GAO Report on AIG Bailout

Ranking Member Cummings Addresses New GAO Report on AIG Bailout


Washington, DC—Ranking Member Elijah E. Cummings issued the following statement on a new GAO report issued regarding AIG. The report found inconsistent accounts of attempts by the Federal Reserve Bank of New York to negotiate with AIG’s counterparties to lower U.S. taxpayer exposure.

“GAO’s report cries out for the full and immediate implementation of the Dodd-Frank Act. As distasteful as the AIG bailout was, the systemic risk posed by AIG to the domestic and international economies was real, and cannot be overstated. This report reinforces the need to implement provisions in Dodd-Frank that will prohibit the use of tax-payer dollars to artificially prop up or benefit one firm, and ensure that massive, nonbank companies cannot engage in financial transactions that put our nation’s economy at risk again.”

Cummings was one of the Members of Congress who asked GAO to examine the decision to provide AIG with taxpayer funds. The report echoes the findings of investigations conducted, at Cummings’s request, by the House Oversight and Government Reform Committee and the Special Inspector General for the Troubled Assets Relief Program (SIGTARP) which found clear shortfalls in the Federal Reserve Bank of New York’s negotiations with AIG counterparties regarding the payments they would receive for credit default swap contracts they held.

Highlights of the GAO report include the following:

  •        “The possibility of AIG’s failure drove Federal Reserve aid after private financing failed.”
  •        “[Federal Reserve Bank of New York’s] Maiden Lane III design likely required greater borrowing, and accounts of attempts to gain concessions from AIG counterparties are inconsistent.”
  •        “The Federal Reserve’s actions were generally consistent with existing laws and policies, but they raised a number of questions.”
  •        “Initial Federal Reserve lending terms were designed to be more onerous than private sector financing.”
  •        “The AIG crisis offers lessons that could improve ongoing regulation and responses to future crises.”

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Financial Crisis: Review of Federal Reserve System Financial Assistance to American International Group, Inc.

Financial Crisis: Review of Federal Reserve System Financial Assistance to American International Group, Inc.


Summary

In September 2008, the Board of Governors of the Federal Reserve System (Federal Reserve Board) approved emergency lending to American International Group, Inc. (AIG)–the first in a series of actions that, together with the Department of the Treasury, authorized $182.3 billion in federal aid to assist the company. Federal Reserve System officials said that their goal was to avert a disorderly failure of AIG, which they believed would have posed systemic risk to the financial system. But these actions were controversial, raising questions about government intervention in the private marketplace. This report discusses (1) key decisions to provide aid to AIG; (2) decisions involving the Maiden Lane III (ML III) special purpose vehicle (SPV), which was a central part of providing assistance to the company; (3) the extent to which actions were consistent with relevant law or policy; and (4) lessons learned from the AIG assistance. To address these issues, GAO focused on the initial assistance to AIG and subsequent creation of ML III. GAO examined a large volume of AIG-related documents, primarily from the Federal Reserve System–the Federal Reserve Board and the Federal Reserve Bank of New York (FRBNY)–and conducted a wide range of interviews, including with Federal Reserve System staff, FRBNY advisors, former and current AIG executives, AIG business counterparties, credit rating agencies, potential private financiers, academics, finance experts, state insurance officials, and Securities and Exchange Commission (SEC) officials. Although GAO makes no new recommendations in this report, it reiterates previous recommendations aimed at improving the Federal Reserve System’s documentation standards and conflict-of-interest policies.

While warning signs of the company’s difficulties had begun to appear a year before the Federal Reserve System provided assistance, Federal Reserve System officials said they became acutely aware of AIG’s deteriorating condition in September 2008. The Federal Reserve System received information through its financial markets monitoring and ultimately intervened as the possibility of bankruptcy became imminent. Efforts by AIG and the Federal Reserve System to secure private financing failed after the extent of AIG’s liquidity needs became clearer. Both the Federal Reserve System and AIG considered bankruptcy issues, although no bankruptcy filing was made. Due to AIG’s deteriorating condition in September 2008, the Federal Reserve System said it had little opportunity to consider alternatives before its initial assistance. As AIG’s troubles persisted, the company and the Federal Reserve System considered a range of options, including guarantees, accelerated asset sales, and nationalization. According to Federal Reserve System officials, AIG’s credit ratings were a critical consideration in the assistance, as downgrades would have further strained AIG’s liquidity position. After the initial federal assistance, ML III became a key part of the Federal Reserve System’s continuing efforts to stabilize AIG. With ML III, FRBNY loaned funds to an SPV established to buy collateralized debt obligations (CDO) from AIG counterparties that had purchased credit default swaps from AIG to protect the value of those assets. In exchange, the counterparties agreed to terminate the credit default swaps, which were a significant source of AIG’s liquidity problems. As the value of the CDO assets, or the condition of AIG itself, declined, AIG was required to provide additional collateral to its counterparties. In designing ML III, FRBNY said that it chose the only option available given constraints at the time, deciding against plans that could have reduced the size of its lending or increased the loan’s security. Although the Federal Reserve Board approved ML III with an expectation that concessions would be negotiated with AIG’s counterparties, FRBNY made varying attempts to obtain these discounts. FRBNY officials said that they had little bargaining power in seeking concessions and would have faced difficulty in getting all counterparties to agree to a discount. While FRBNY took actions to treat the counterparties alike, the perceived value of ML III participation likely varied by the size of a counterparty’s exposure to AIG or its method of managing risk. While the Federal Reserve Board exercised broad emergency lending authority to assist AIG, it was not required to, nor did it, fully document its interpretation of its authority or the basis of its decisions. For federal securities filings AIG was required to make, FRBNY influenced the company’s filings about federal aid but did not direct AIG on what information to disclose. In providing aid to AIG, FRBNY implemented conflict-of-interest procedures, and granted a number of waivers, many of which were conditioned on the separation of employees and information. A series of complex relationships grew out of the government’s intervention, involving FRBNY advisors, AIG counterparties, and others, which could expose FRBNY to greater risk that it would not fully identify and appropriately manage conflict issues and relationships.

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The Sanders Report on the GAO Audit on Major Conflicts of Interest at the Federal Reserve

The Sanders Report on the GAO Audit on Major Conflicts of Interest at the Federal Reserve


The Sanders Report on the GAO Audit on Major Conflicts of Interest at the Federal Reserve

U.S. Senator Bernie Sanders (I-Vt.)
Washington, DC
October 19, 2011

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GAO Finds Serious Conflicts at the Fed: Jamie Dimon was on the board of the NY Fed while his bank received loans from the Fed Reserve.

GAO Finds Serious Conflicts at the Fed: Jamie Dimon was on the board of the NY Fed while his bank received loans from the Fed Reserve.


Excerpt via Senator Sanders-

The report by the non-partisan research arm of Congress did not name but unambiguously described several individual cases involving Fed directors that created the appearance of a conflict of interest, including:

  • Stephen Friedman In 2008, the New York Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap Fed loans. During the same period, Friedman, chairman of the New York Fed, sat on the Goldman Sachs board of directors and owned Goldman stock, something the Fed’s rules prohibited. He received a waiver in late 2008 that was not made public. After Friedman received the waiver, he continued to purchase stock in Goldman from November 2008 through January of 2009 unbeknownst to the Fed, according to the GAO.
  • Jeffrey Immelt The Federal Reserve Bank of New York consulted with General Electric on the creation of the Commercial Paper Funding Facility. The Fed later provided $16 billion in financing for GE under the emergency lending program while Immelt, GE’s CEO, served as a director on the board of the Federal Reserve Bank of New York.
  • Jamie Dimon The CEO of JP Morgan Chase served on the board of the Federal Reserve Bank of New York at the same time that his bank received emergency loans from the Fed and was used by the Fed as a clearing bank for the Fed’s emergency lending programs. In 2008, the Fed provided JP Morgan Chase with $29 billion in financing to acquire Bear Stearns.At the time, Dimon persuaded the Fed to provide JP Morgan Chase with an 18-month exemption from risk-based leverage and capital requirements. He also convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired this troubled investment bank.
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NYT | New Rules for Mortgage Servicers Face Early Criticism

NYT | New Rules for Mortgage Servicers Face Early Criticism


Federal banking regulators have not officially imposed their new rules for the top mortgage servicers, but criticism is already being heard. A wide coalition of consumer and housing groups is denouncing the legal agreements, which are likely to be published within a few days. ?

[…]

The problem, said Alys Cohen of the National Consumer Law Center, is the agreements “do not in any way require the servicers to stop avoidable foreclosures, and that is what we need.”

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WSJ | Lenders Near Pacts With Regulators in Foreclosure Probe

WSJ | Lenders Near Pacts With Regulators in Foreclosure Probe


More and more proof the whole Fraudclosure Settlement “leaders” are discombobulated.  Just last week, AG Tom Miller said “We have a long way to go.”

Now.. according to the Wall Street Journal

Regulators including the Office of the Comptroller of the Currency, Federal Reserve and Office of Thrift Supervision could announce the agreements with the banks and thrifts as early as next week, though a date wasn’t final, according to people familiar with the matter.

The regulators are likely to act ahead of state attorneys general, who are also in talks with the banks. Those discussions are moving at a slower pace amid disputes among several state officials.

Seriously, why aren’t they all working together? Lefty doesn’t know what the right is doing.

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The Federal Reserve made $82 billion last year, mostly from securities it bought during financial crisis

The Federal Reserve made $82 billion last year, mostly from securities it bought during financial crisis


From the Wall Street Journal:

The Federal Reserve‘s net income surged 53% to $81.74 billion last year from 2009 mainly due to higher earnings from securities the central bank bought to counter the financial crisis, according to final audited results released Tuesday.

Almost all of that income — $79.27 billion — will be sent back to the U.S. Treasury. The record transfer marks a 68% increase from the $47.43 billion the Fed sent back to Treasury in 2009. The figures were slightly higher than preliminary results published in January.

To fight the financial crisis, the Fed bought securities whose value had collapsed due to fear and uncertainty in markets and set up emergency lending programs for banks and firms, thus boosting its balance sheet. The central bank came under attack for taking too many risk with taxpayers money and putting itself in a position to suffer losses.

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MAX GARDNER | Why Don’t AGs Want to Get to the Bottom of the Mortgage Mess?

MAX GARDNER | Why Don’t AGs Want to Get to the Bottom of the Mortgage Mess?


via Max Gardner

Gretchen Morgenson’s column in the New York Times yesterday points out a connection we should all be making:  the high-speed, no time to think or do things right mindset of the mortgage industry is to blame for a lot of the problems we’re facing today, and that same mindset seems to be controlling the actions of the Attorneys General right now.  Tom Miller, the Iowa Attorney General leading the talks, told us just last week, “We’re going to move as fast as we can.”

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ARE YOU KIDDING? Fed Investigation Can’t Find 1 Homeowner Wrongfully Foreclosed Upon

ARE YOU KIDDING? Fed Investigation Can’t Find 1 Homeowner Wrongfully Foreclosed Upon


Fed Report Finds No Wrongful Foreclosures By Banks, Consumer Advocates Slam Methodology

Shahien Nasiripour
Shahien Nasiripour HuffPost Reporting shahien@huffingtonpost.com

WASHINGTON, D.C. — A months-long investigation into abusive mortgage practices by the Federal Reserve found no wrongful foreclosures, members of the Fed’s Consumer Advisory Council said Thursday.

During a public meeting attended by Fed chairman Ben Bernanke and other regulators, consumer advocates on the panel criticized federal bank regulators for narrowly defining what constitutes a “wrongful foreclosure.” At least one member of the panel voiced concerns that the public would not take the Fed’s findings of improper practices seriously, since the wide-ranging review did not find a single homeowner who was wrongfully foreclosed upon.

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Governor Kevin Warsh resigns from Board of Governors of the Federal Reserve System, effective on or around March 31, 2011

Governor Kevin Warsh resigns from Board of Governors of the Federal Reserve System, effective on or around March 31, 2011


Kevin Warsh announced his intent to resign as a member of the Board of Governors of the Federal Reserve System on or around March 31, 2011.

Governor Warsh, a member of the Board since February 2006, submitted his letter of resignation to President Obama today.

“Kevin rendered the Federal Reserve and the nation exemplary service during his time at the Board,” Federal Reserve Board Chairman Ben S. Bernanke said. “In particular, his intimate knowledge of financial markets and institutions proved invaluable during the recent crisis. And he worked energetically and effectively behind the scenes overseeing the operations of the Board and the Federal Reserve System. I deeply appreciate his insights and wise counsel and, most especially, his fortitude and friendship during the difficult days, nights, and weekends of the crisis.”

Warsh has focused most significantly on issues related to financial markets and the conduct of monetary policy.

Warsh has served as the Federal Reserve’s representative to the Group of Twenty and the Board’s emissary to the emerging and advanced economies in Asia. In addition, he has served as Administrative Governor, managing and overseeing the Board’s operations, personnel, and financial performance.

Prior to his appointment to the Board, from 2002 until 2006, Warsh served as Special Assistant to the President for Economic Policy and Executive Secretary of the White House National Economic Council.

Source: federalreserve.gov

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NYTIMES | A Coming Nightmare of Homeownership?

NYTIMES | A Coming Nightmare of Homeownership?


By GRETCHEN MORGENSON
Published: October 3, 2004

IT is literally a trillion-dollar question: What will a humbled, reined-in Fannie Mae, the nation’s biggest mortgage provider, mean to the economy, the financial markets, interest rates and housing in America?

Since regulators disclosed evidence of widespread accounting improprieties at the company, which carries almost $1 trillion in mortgages on its books, the response from the financial markets has been surprisingly muted. To be sure, Fannie Mae’s stock has lost 14 percent of its value, but its debt securities have held fairly steady and the pools of mortgages it sells to investors have continued to attract buyers.

Even if Fannie Mae’s troubles are eventually worked out, there may be other, potentially nasty reverberations from the company’s weakened position. These include a possible hit to the dollar if foreign investors, who have bought so much of the company’s debt, become alarmed by the accounting problems and sell.

James A. Bianco of Bianco Research in Chicago, said he thinks foreigners might well cut back on their Fannie Mae debt holdings, as they seem to have done when Freddie Mac, another government-sponsored enterprise in the mortgage business, had its own accounting problems last year. ”If Freddie spooked foreigners, the Fannie scandal will exacerbate the trend,” he said.

In addition, Fannie Mae’s woes could work against the Federal Reserve Board as it moves to keep inflation in check by raising interest rates. If the company, under heightened scrutiny, decides that it must manage its interest rate risk more aggressively, it would have to buy huge amounts of Treasury securities. Doing so would push rates down further, creating a vicious cycle in which more homeowners refinance their mortgages, leaving Fannie Mae with a larger mismatch between the longer-term debt they have issued to buy the mortgages and the shorter-lived mortgages themselves.



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Usage of Federal Reserve Credit and Liquidity Facilities “BAILOUT FUNDS”

Usage of Federal Reserve Credit and Liquidity Facilities “BAILOUT FUNDS”


This section of the website provides detailed information about the liquidity and credit programs and other monetary policy tools that the Federal Reserve used to respond to the financial crisis that emerged in the summer of 2007. These programs fall into three broad categories–those aimed at addressing severe liquidity strains in key financial markets, those aimed at providing credit to troubled systemically important institutions, and those aimed at fostering economic recovery by lowering longer-term interest rates.

The emergency liquidity programs that the Federal Reserve set up provided secured and mostly short-term loans. Over time, these programs helped to alleviate the strains and to restore normal functioning in a number of key financial markets, supporting the flow of credit to businesses and households. As financial markets stabilized, the Federal Reserve closed most of these programs. Indeed, many of the programs were intentionally priced to be unattractive to borrowers when markets are functioning normally and, as a result, wound down as market conditions improved. The programs achieved their intended purposes with no loss to taxpayers.

The Federal Reserve also provided credit to several systemically important financial institutions. These actions were taken to avoid the disorderly failure of these institutions and the potential catastrophic consequences for the U.S. financial system and economy. All extensions of credit were fully secured and are in the process of being fully repaid.

Finally, the Federal Reserve provided economic stimulus by lowering interest rates. Over the course of the crisis, the Federal Open Market Committee (FOMC) reduced its target for the federal funds rate to a range of 0 to 1/4 percent. With the federal funds rate at its effective lower bound, the FOMC provided further monetary policy stimulus through large-scale purchases of longer-term Treasury debt, federal agency debt, and agency mortgage-backed securities (agency MBS). These asset purchases helped to lower longer-term interest rates and generally improved conditions in private credit markets.

The links to the right provide detailed information about the programs that were established in response to the crisis. Details for each loan include: the borrower, the date that credit was extended, the interest rate, information about the collateral, and other relevant terms. Similar information is supplied for swap line draws and repayments. Details for each agency MBS purchase include: the counterparty to the transaction, the date of the transaction, the amount of the transaction, and the price at which each transaction was conducted. The transaction data are provided in compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Federal Reserve will revise the data to ensure that they are accurate and complete.

No rules about executive compensation or dividend payments were applied to borrowers using Federal Reserve facilities. Executive compensation restrictions were imposed by statute on firms receiving assistance through the U.S. Treasury’s Troubled Asset Relief Program (TARP). Dividend restrictions were the province of the appropriate supervisors and were imposed by the Federal Reserve on bank holding companies in that role, but not because of borrowing through the facilities discussed here.

Additional information about the Federal Reserve’s credit and liquidity programs is available on the Credit and Liquidity Programs and the Balance Sheet section.

Facilities and Programs

Source: federalreserve.gov

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FULL TRANSCRIPT: Home Mortgage Disclosure Act Public Hearings, September 24, 2010

FULL TRANSCRIPT: Home Mortgage Disclosure Act Public Hearings, September 24, 2010


Excerpt:

How to report? One of the things we strongly recommend is that you look at the MISMO standards, the Mortgage Industry Standards Maintenance Organization, for definitions, for format, and I think this might address issues, for example, with HUD reported credit score. That if you like at the MISMO, we don’t simply look at one field for credit score. There’s a field for a number. There’s also then a field of whether it’s a vantage score, whether it comes from FICO, what vendor reported the score. So that there are a number of variables then that are really behind it, and if you simply then pick up all of these variables associated with the credit score the way we do, you can then use the information internal to then generate whatever percentile or whatever calculation you would like to do, but that that would not be put back on the lender to reenter data, to rekey it, but instead use what’s already out there in the industry. Also it would provide for easier changes later on, if any additions are needed.

What about a universal mortgage identifier? That has been brought up. We would strongly recommend that you look at the mortgage identification number that’s been put out by the Mortgage Electronic Registration System, MERS. It allows us to track mortgages throughout the system from application all the way to sale of servicing, sales of the secondary market and I think for these purposes it would allow us to really sort of track some of the under coverage that we do see in the HMDA data. We did some analysis and found that by throwing out all the correspondent loans, we are eliminating a number of loans that had no counterpart in the retail broker data.

What to make public? Well, we really think that’s your decision. In a sense that there are a number of data elements here that we would very much not want to make public as companies because of the limitations we face, but that certainly that’s an issue that the bureau and the Fed will have to face going forward is the tradeoff between risks of identity theft associated with some of these elements and that, but that’s really your decision to make rather than the industry, and to some degree, we would benefit, I think, in terms of what would explain what’s going on in the industry with a greater data release.

Finally on multifamily, we did an analysis and we think that HMDA already covers about 95 percent of the multifamily loans that are made. In contrast, though, it covers only about 60 percent or so of the dollar amount of the loans. So that if you look then at the average loan amount that’s in HMDA, it’s about $1.7 million for a multifamily loan. If you look at the average loan size of what’s missing, it’s about $19 million. So we don’t know how much effort really should be put into trying to capture this remaining 5 percent of really high dollar loans that are done for just an entirely different set of investors out there. So I think you really ought to look at what do you really want to do with the multifamily data? Do you really want to expand it or is there a questionable usefulness of what’s already there? Thank you.

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Fed’s `Pit Bull’ Takes on Bank of America in BuyBack Battle

Fed’s `Pit Bull’ Takes on Bank of America in BuyBack Battle


By Thom Weidlich, Laurel Brubaker Calkins and Jody Shenn – Oct 26, 2010 12:01 AM ET

Kathy D. Patrick is a Houston lawyer who spends her Sundays teaching children about God. The rest of the week, according to one attorney who knows her, she can be “as frightening as a pit bull on steroids.”

That’s bad news for issuers of mortgage-backed securities like Bank of America Corp. Patrick represents bond investors including the Federal Reserve Bank of New York and BlackRock Inc. who are seeking to force the bank to buy back bad home loans, claiming the debt failed to match contractual promises about its quality.

Her law firm, Gibbs & Bruns LLP, is a 30-lawyer outfit that says it specializes in “bet the company” litigation. This month, it reached a settlement with JPMorgan Chase & Co. and Bank of Montreal stemming from an alleged fraud at a Canadian gold company. Earlier this year, Goldman Sachs Group Inc. and UBS AG settled with the firm over the sale of $550 million in mortgage-backed securities. Patrick reached that settlement on behalf of her clients just two months after filing suit.

Patrick, 50, is “fearless and tenacious,” said Dan Cogdell, a Houston criminal-defense lawyer who said she is capable of pit bull-like aggressiveness “if the need be.” If she succeeds in getting Bank of America to settle, it may trigger more calls for buybacks in the $1.4 trillion market for so-called non-agency mortgage securities, which lack government backing.

Bank costs from repurchasing mortgages in such securities may total as much as $179.2 billion, including expenses related to suits against bond underwriters, Chris Gamaitoni, a Compass Point Research and Trading LLC analyst, estimated in August.

$1.73 Billion

In June 2009, Patrick got Credit Suisse Group AG and Deutsche Bank AG to agree to pay $1.73 billion to end litigation over their decision to back out of the leveraged buyout of Huntsman Corp. Her firm is suing Zurich-based Credit Suisse as bond underwriter for a now-defunct Ohio company that sold securities based on health-care providers’ unpaid bills.

“She has a deep understanding of the banking process and the constraints, motivations and incentives of the banking industry,” said Harry M. Reasoner, a partner at Vinson & Elkins LLP in Houston, who also represented Huntsman.

In the fight against Charlotte, North Carolina-based Bank of America, Patrick represents the biggest bond investors in the U.S., including Pacific Investment Management Co., which runs the world’s biggest bond fund.

$47 Billion

On Oct. 18, she wrote Bank of America and Bank of New York Mellon Corp., the trustee for $47 billion of bonds created by Bank of America’s Countrywide Financial unit. In the letter, she accused Countrywide of failing to service the home loans properly. Her clients want Bank of America, which bought Countrywide in 2008, to take back some of the underlying loans, and are questioning its servicing as a way to broaden their legal options, Patrick said the next day.

“We continue to review and assess the letter, and have a number of questions about its content, including whether these investors have standing to bring these claims,” Bank of America Chief Financial Officer Charles H. Noski said Oct. 19 on a conference call with analysts. “We continue to believe the servicer is in compliance with the servicing obligations.”

.

?

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MBA Testifies on Potential Revisions to The Home Mortgage Disclosure Act (HMDA)

MBA Testifies on Potential Revisions to The Home Mortgage Disclosure Act (HMDA)


WASHINGTON, D.C. (September 24, 2010) – Jay Brinkmann, Chief Economist and Senior Vice President of Research and Economics for the Mortgage Bankers Association (MBA), testified today before the Federal Reserve Board of Governors at a hearing entitled, “Potential Revisions to Regulation C – Implementing the Home Mortgage Disclosure Act (HMDA).”

Below is Mr. Brinkmann’s oral statement before the committee, as prepared for delivery.

“My name is Jay Brinkmann and I am the Chief Economist and head of research at the Mortgage Bankers Association (MBA). I very much appreciate the opportunity to participate in today’s hearing of the Federal Reserve Board on potential revisions to its Home Mortgage Disclosure Act (HMDA) requirements.

I would like to address essentially five questions or areas that need to be addressed. First, what data should be required? Second, how should the data be reported? Third, what should be used as the universal mortgage identifier? Fourth, what data should be made public? Finally, I will address some issues regarding multifamily data.

What data should be required?

Dodd-Frank already requires a significant expansion of the required data elements, although some are left to the discretion of the Bureau of Consumer Financial Protection (CFPB). In addition, we understand the Federal Reserve is looking at some potential additions beyond what is in Dodd-Frank. We have no objection to an expansion of the HMDA data elements as long as that expansion is consistent with the stated purposes of HMDA, the elements are consistent with what is already collected, and the changes would not pose unnecessary burdens on lenders. It should be understood, however, that no matter how many additional data elements are required they will not serve as a reliable proxy for the range of credit models or credit decisions given the sequential nature of the credit decision, variations in decision-making processes among lenders, as well as variations in shopping behavior and self-selection of credit terms by borrowers.

One issue the Fed must keep in mind in determining what data elements to collect is that HMDA requirements should not turn into a safe harbor of allowable credit variables to be considered when making a loan. Freezing credit models into an official sanctioned set of variables would have a deleterious impact on credit availability going forward, limiting the growth of lenders who believe they have a better idea of how to do things. For example, over the years some lenders have come to believe that credit scores are not as important as the number of times a potential borrower has been late with housing-related payments. Some lenders now will simply refuse to make a loan to a borrower who has walked away from a previous mortgage, or appears to be positioning himself or herself for such behavior. None of these considerations are captured in any of the proposed HMDA data elements, nor should they be.

How to report?

In determining definitions and file formats for potential data items, the Fed should use the standard and uniform definitions developed over the last ten years by the Mortgage Industry Standards and Maintenance Organization, Inc. (MISMO®). Reliance on MISMO definitions would greatly reduce the regulatory compliance burden by allowing lenders and vendors furnishing HMDA compliance services to pull from existing MISMO-compliant databases to report under HMDA. This would reduce the errors associated with entering data a second time for HMDA purposes and reduce the phase-in period for trying to interpret and then implementing new HMDA definitions. In addition, MISMO standards have already been adopted by Fannie Mae and Freddie Mac.

Reliance on the MISMO dictionary and standards would also help deal with the ambiguity surrounding some of the data elements specified in Dodd-Frank. For example, Dodd-Frank requires that credit scores be reported. MISMO recognizes that there is no such thing as a single credit score, so while it has a field for the score, it also has a field for the credit score vendor (such as Vantage Score or FICO), and the reporting agency. Rather than asking lenders to map multiple fields into a single number to be reported to the Fed, a number that likely would not appear in any credit file nor be used in the credit or loan pricing decision, the Fed could simply ask for the multiple fields dealing with credit scores and do its own mapping depending on whether it is doing a company-level or industry-level analysis.

I cannot stress enough the extent of the regulatory burden that HMDA and other reporting and compliance requirements place on the industry. The largest shares of investments in technology today are going to reporting and compliance needs, with no direct benefit to the companies or their customers. I would hope that the Fed would keep this burden and its costs in mind and minimize future changes in HMDA once these changes are made. Relying on MISMO would not only minimize costs but it would allow minor tweaking of data requirements in the future with less burden.

What to use as the universal mortgage identifier?

The industry already has a uniform mortgage identification number that is issued through the Mortgage Electronic Registration Systems, Inc. (MERS). This MERS number is used by a very high percentage of lenders and is integral to numerous origination and secondary market functions. It would cause considerable confusion and unnecessary implementation expense to impose a new mortgage identification protocol on the industry. Reliance on the MERS Mortgage Identification Number (MIN) allows loans to be tracked from origination through sale in the secondary market and subsequent servicing, and is valuable in identifying and preventing mortgage fraud.

For the Fed’s purposes, a further advantage of using the MERS MIN is that it would help prevent double counting or the failure to count loans altogether. For example, the current practice of eliminating loans purchased as closed loans from correspondent banks lowers the apparent coverage level of HMDA. In an effort to see what was missing from HMDA, the MBA several years ago did a matched-pair analysis of correspondent loans and found that a large percentage did not have a matching loan in the retail/broker data. Use of the MERS MIN would largely solve the problem of estimating coverage levels because it would permit an explicit matching between retail/broker originations and correspondent originations, it would provide a matching of loans originated in one calendar year and sold in another, and it allow loan data to be double checked against other data sources like Fannie Mae, Freddie Mac and Ginnie Mae.

What to make public?

Federal Reserve staff have developed considerable expertise in the analysis and interpretation of HMDA data. Their annual article in the Federal Reserve Bulletin is the source of information on HMDA for most analysts. In recent years, Fed staff have gone the extra mile to conduct analyses beyond the HMDA data to answer topical policy questions.

However, while it is proper and customary for a firm’s regulator to have access to confidential data, care needs to taken before those data are made public. While we see tremendous risk of widespread identity theft if all of the HMDA data elements were to be released in their collected form, particularly when those data are combined with other publicly available data, under Dodd-Frank, decisions on such release now lie with the Board and later the CFPB. The lending industry has poured tremendous resources into safeguarding the private information of our customers, and we have paid large fines for lapses. No doubt we would face the potential of additional fines and public recrimination were we to make the proposed HMDA data elements available to the public at large. That is why any liability associated with the collection and release of these data pursuant to Board rules should lie with the Fed. Moreover, the Board should provide guidance on how lenders should deal with requests that come directly to them for these data.

To a certain degree, we would support a greater release of credit data in some form. While it still would not solve all of the statistical problems associated with trying to mimic credit models with these data, it would go a long way to putting to rest once and for all charges of racism that have been hurled at the industry by various groups over the years that have no basis in fact. The econometric problems of omitted variables, multicolinearity and spurious correlation would still remain, but sufficient data would be available in the public domain to refute most of these charges.

What multifamily data should be reported?

MBA estimates that the 2008 HMDA data contained information on 95 percent of the multifamily loans made that year based on the number of loans, but covered only about 61 percent of their dollar amount. The average multifamily loan in HMDA was about $1.7 million while the average missing loan was about $18.9 million. We question the benefit of expanding the reporting requirements to include a relative small number of high-dollar multifamily projects.

Clearly, the data elements associated with single-family lending are not applicable to any but the smallest multifamily projects. Variables like race and credit score do not apply to limited partnerships, corporations or real estate investment trusts. We suggest that the Fed should examine the usefulness of the multifamily data it collects now with an eye to scaling back the requirement rather than going to large lengths to expand the reporting requirements to cover a small number of large dollar projects.

In conclusion, in making changes to the required data elements of HMDA, the Fed should look carefully at what is needed considering the new data requirements under Dodd-Frank and their costs, integrating the data requirements with what is already being collected, and using data definitions and identifiers that are already in common use. In addition, the Fed should be very concerned with the privacy related issues that would attend a wholesale public release of the new required data elements.”

###

The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA’s Web site: www.mortgagebankers.org.

© 2010-15 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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Congress Needs To ZERO IN On A “Common Thread” To Fannie, Freddie Mortgage Crisis

Congress Needs To ZERO IN On A “Common Thread” To Fannie, Freddie Mortgage Crisis


Anyone can see the “Fiction” that was set into place from all the institutions in this article below. Each one of these named parties as a shareholder utilizes Mortgage Electronic Registration Systems, Inc., yet Washington never mentions this MERS device.

All this talk of false and misleading loans blah blah blah …I mean grab the bull by it’s nuts and put these criminals behind bars. Not just seek refunds! This clean up should also seek Racketeering Indictments.

Congress Seeks Fannie, Freddie Exit as Banks Eat Soured Loans

By Dawn Kopecki – Sep 15, 2010 1:00 AM ET

U.S. lawmakers will grapple today with how to end the bailout of Fannie Mae and Freddie Mac after two years and almost $150 billion, and who pays the bill for bad loans made during the housing boom.

Regulators who seized control of the two mortgage lenders in 2008 are under pressure to stem losses for taxpayers and recoup money from banks that sold faulty loans to Fannie Mae and Freddie Mac — all without hindering the housing market’s recovery. Assistant Treasury Secretary Michael Barr and Edward DeMarco, acting director of the Federal Housing Finance Agency, are scheduled to testify today on their progress at the House Financial Services Committee.

The Obama administration and Congress are weighing the future of the two companies as part of an overhaul of the U.S. housing finance system. Fannie Mae, based in Washington, and Freddie Mac, based in McLean, Virginia, lost $166 billion on guarantees of single-family mortgages from the end of 2007 through the second quarter, according to the FHFA. Treasury Secretary Timothy F. Geithner has promised a comprehensive proposal by early next year.

“The biggest problem in the economy is that we have three or four million too many homes,” said Chris Kotowski, a banking analyst at Oppenheimer & Co. The solution “will take another two or three years to work out until we sop up the excess supply,” Kotowski said.

Loan Clean-Up

The clean-up includes seeking refunds from lenders who sold loans based on false or misleading information, and the two government-backed firms aren’t the only ones demanding buybacks. The Federal Reserve, private mortgage investors and mortgage insurers are combing through loan documents for faulty appraisals, inflated borrower incomes and missing documentation that would support a refund request.

As of the end of the second quarter 2010, Fannie Mae had $4.7 billion in outstanding repurchase requests, and Freddie Mac had $6.4 billion in outstanding repurchase requests. DeMarco said in his prepared testimony that outstanding repurchase requests continue to be “of concern.”

Continue reading…BLOOMBERG

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© 2010-15 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in bank of america, chain in title, CitiGroup, concealment, congress, conspiracy, CONTROL FRAUD, corruption, Credit Suisse, fannie mae, federal reserve board, foreclosure, foreclosure fraud, foreclosure mills, foreclosures, investigation, MERS, MERSCORP, mortgage, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., RICO, scam, servicers, settlement, stopforeclosurefraud.com, sub-prime, trustee, Trusts, us bank, Wall StreetComments (2)

Fed Ends Bank Exemption Aimed at Boosting Mortgage Liquidity: Bloomberg

Fed Ends Bank Exemption Aimed at Boosting Mortgage Liquidity: Bloomberg


By Craig Torres

March 20 (Bloomberg) — The Federal Reserve Board removed an exemption it had given to six banks at the start of the crisis in 2007 aimed at boosting liquidity in financing markets for securities backed by mortgage- and asset-backed securities.

The so-called 23-A exemptions, named after a section of the Federal Reserve Act that limits such trades to protect bank depositors, were granted days after the Fed cut the discount rate by half a percentage point on Aug. 17, 2007. Their removal, announced yesterday in Washington, is part of a broad wind-down of emergency liquidity backstops by the Fed as markets normalize.

The decision in 2007 underscores how Fed officials defined the mortgage-market disruptions that year as partly driven by liquidity constraints. In hindsight, some analysts say that diagnosis turned out to be wrong.

“It was a way to prevent further deleveraging of the financial system, but that happened anyway,” said Dino Kos, managing director at Portales Partners LLC and former head of the New York Fed’s open market operations. “The underlying problem was solvency. The Fed was slow to recognize that.”

The Fed ended the exemptions in nearly identical letters to the Royal Bank of Scotland Plc, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Deutsche Bank AG, and Barclays Bank Plc posted on its Web site.

Backstop Liquidity

The Fed’s intent in 2007 was to provide backstop liquidity for financial markets through the discount window. In a chain of credit, investors would obtain collateralized loans from dealers, dealers would obtain collateralized loans from banks, and then banks could pledge collateral to the Fed’s discount window for 30-day credit. In Citigroup’s case, the exemption allowed such lending to its securities unit up to $25 billion.

“The goal was to stop the hemorrhaging of risk capital,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “Investors were being forced out of the securities market because they couldn’t fund their positions, even in higher-quality assets in some cases.”

Using mortgage bonds without government-backed guarantees as collateral for private-market financing began to get more difficult in August 2007 following the collapse of two Bear Stearns Cos. hedge funds.

As terms for loans secured by mortgage bonds got “massively” tighter, haircuts, or the excess in collateral above the amount borrowed, on AAA home-loan securities rose that month from as little as 3 percent to as much as 10 percent, according to a UBS AG report.

Lehman Collapse

By February 2008, haircuts climbed to 20 percent, investor Luminent Mortgage Capital Inc. said at the time. After Lehman Brothers Holdings Inc. collapsed in September 2008, the loans almost disappeared.

“These activities were intended to allow the bank to extend credit to market participants in need of short-term liquidity to finance” holdings of mortgage loans and asset- backed securities, said the Fed board’s letter dated yesterday to Kathleen Juhase, associate general counsel of JPMorgan. “In light of this normalization of the term for discount window loans, the Board has terminated the temporary section 23-A exemption.”

The “normalization” refers to the Fed’s reduction in the term of discount window loans to overnight credit starting two days ago from a month previously.

The Fed eventually loaned directly to securities firms and opened the discount window to primary dealers in March 2008. Borrowings under the Primary Dealer Credit Facility soared to $146.5 billion on Oct. 1, 2008, following the collapse of Lehman Brothers two weeks earlier. Borrowings fell to zero in May 2009. The Fed closed the facility last month, along with three other emergency liquidity backstops.

Discount Rate

The Fed also raised the discount rate a quarter point in February to 0.75 percent, moving it closer to its normal spread over the federal funds rate of 1 percentage point.

The one interest rate the Fed hasn’t changed since the depths of the crisis is the benchmark lending rate. Officials kept the target for overnight loans among banks in a range of zero to 0.25 percent on March 16, where it has stood since December 2008, while retaining a pledge to keep rates low “for an extended period.”

Removing the 23-A exemptions shows the Fed wants to get “back to normal,” said Laurence Meyer, a former Fed governor and vice chairman of Macroeconomic Advisers LLC in Washington. “Everything has gone back to normal except monetary policy.”

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net

Last Updated: March 20, 2010 00:00 EDT

Posted in bank of america, bear stearns, bernanke, bloomberg, chase, citi, concealment, conspiracy, corruption, Dick Fuld, fdic, FED FRAUD, federal reserve board, FOIA, forensic mortgage investigation audit, freedom of information act, G. Edward Griffin, geithner, jpmorgan chase, lehman brothers, note, RON PAUL, scam, washington mutual, wells fargoComments (0)

Federal Reserve Must Disclose Bank Bailout Records (Update5): We love Bloomberg.com

Federal Reserve Must Disclose Bank Bailout Records (Update5): We love Bloomberg.com


SHOCK & AWE …I’m betting! Thanks to Bloomberg for the lawsuit to DISCLOSE! Notice how both Bloomberg & Huffington are always the ones who go after the banksters…Because they probably don’t use the banksters to fund them!

By David Glovin and Bob Van Voris

March 19 (Bloomberg) — The Federal Reserve Board must disclose documents identifying financial firms that might have collapsed without the largest U.S. government bailout ever, a federal appeals court said.

The U.S. Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released.

The Fed had argued that disclosure of the documents threatens to stigmatize borrowers and cause them “severe and irreparable competitive injury,” discouraging banks in distress from seeking help. A three-judge panel of the appeals court rejected that argument in a unanimous decision.

The U.S. Freedom of Information Act, or FOIA, “sets forth no basis for the exemption the Board asks us to read into it,” U.S. Circuit Chief Judge Dennis Jacobs wrote in the opinion. “If the Board believes such an exemption would better serve the national interest, it should ask Congress to amend the statute.”

The opinion may not be the final word in the bid for the documents, which was launched by Bloomberg LP, the parent of Bloomberg News, with a November 2008 lawsuit. The Fed may seek a rehearing or appeal to the full appeals court and eventually petition the U.S. Supreme Court.

Right to Know

If today’s ruling is upheld or not appealed by the Fed, it will have to disclose the requested records. That may lead to “catastrophic” results, including demands for the instant disclosure of banks seeking help from the Fed, resulting in a “death sentence” for such financial institutions, said Chris Kotowski, a bank analyst at Oppenheimer & Co. in New York.

“Whenever the Fed extends funds to a bank, it should be disclosed in private to the Congressional oversight committees, but to release it to the public I think would be a horrific mistake,” Kotowski said in an interview. “It would stigmatize the banks, it would lead to all kinds of second-guessing of the Fed, and I don’t see what public purpose is served by it.”

Senator Bernie Sanders, an Independent from Vermont, said the decision was a “major victory” for U.S. taxpayers.

“This money does not belong to the Federal Reserve,” Sanders said in a statement. “It belongs to the American people, and the American people have a right to know where more than $2 trillion of their money has gone.”

Fed Review

The Fed is reviewing the decision and considering its options for reconsideration or appeal, Fed spokesman David Skidmore said.

“We’re obviously pleased with the court’s decision, which is an important affirmation of the public’s right to know what its government is up to,” said Thomas Golden, a partner at New York-based Willkie Farr & Gallagher LLP and Bloomberg’s outside counsel.

The court was asked to decide whether loan records are covered by FOIA. Historically, the type of government documents sought in the case has been protected from public disclosure because they might reveal competitive trade secrets.

The Fed had argued that it could withhold the information under an exemption that allows federal agencies to refuse disclosure of “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”

Payment Processors

The Clearing House Association, which processes payments among banks, joined the case and sided with the Fed. The group includes ABN Amro Bank NV, a unit of Royal Bank of Scotland Plc, Bank of America Corp., The Bank of New York Mellon Corp., Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co., US Bancorp and Wells Fargo & Co.

Paul Saltzman, general counsel for the Clearing House, said the decision did not address the “fundamental issue” of whether disclosure would “competitively harm” borrower banks.

“The Second Circuit declined to follow the decisions of other circuit courts recognizing that disclosure of certain confidential information can impair the effectiveness of government programs, such as lending programs,” Saltzman said in a statement.

The Clearing House is considering whether to ask for a rehearing by the full Second Circuit and, ultimately, review by the U.S. Supreme Court, he said.

Deep Crisis

Oscar Suris, a spokesman for Wells Fargo, JPMorgan spokeswoman Jennifer Zuccarelli, Bank of New York Mellon spokesman Kevin Heine, HSBC spokeswoman Juanita Gutierrez and RBS spokeswoman Linda Harper all declined to comment. Deutsche Bank spokesman Ronald Weichert couldn’t immediately comment. Bank of America declined to comment, Scott Silvestri said. Citigroup spokeswoman Shannon Bell declined to comment. U.S. Bancorp spokesman Steve Dale didn’t return phone and e-mail messages seeking comment.

Bloomberg, majority-owned by New York Mayor Michael Bloomberg, sued after the Fed refused to name the firms it lent to or disclose loan amounts or assets used as collateral under its lending programs. Most of the loans were made in response to the deepest financial crisis since the Great Depression.

Lawyers for Bloomberg argued in court that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money.

“Bloomberg has been trying for almost two years to break down a brick wall of secrecy in order to vindicate the public’s right to learn basic information,” Golden wrote in court filings.

Potential Harm

Banks and the Fed warned that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell- off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued.

Much of the debate at the appeals court argument on Jan. 11 centered on the potential harm to banks if it was revealed that they borrowed from the Fed’s so-called discount window. Matthew Collette, a lawyer for the government, said banks don’t do that unless they have liquidity problems.

FOIA requires federal agencies to make government documents available to the press and public. An exception to the statute protects trade secrets and privileged or confidential financial data. In her Aug. 24 ruling, U.S. District Judge Loretta Preska in New York said the exception didn’t apply because there’s no proof banks would suffer.

Tripartite Test

In its opinion today, the appeals court said that the exception applies only if the agency can satisfy a three-part test. The information must be a trade secret or commercial or financial in character; must be obtained from a person; and must be privileged or confidential, according to the opinion.

The court said that the information sought by Bloomberg was not “obtained from” the borrowing banks. It rejected an alternative argument the individual Federal Reserve Banks are “persons,” for purposes of the law because they would not suffer the kind of harm required under the “privileged and confidential” requirement of the exemption.

In a related case, U.S. District Judge Alvin Hellerstein in New York previously sided with the Fed and refused to order the agency to release Fed documents that Fox News Network sought. The appeals court today returned that case to Hellerstein and told him to order the Fed to conduct further searches for documents and determine whether the documents should be disclosed.

“We are pleased that this information is finally, and rightfully, going to be made available to the American public,” said Kevin Magee, Executive Vice President of Fox Business Network, in a statement.

Balance Sheet Debt

The Fed’s balance sheet debt doubled after lending standards were relaxed following Lehman’s failure on Sept. 15, 2008. That year, the Fed began extending credit directly to companies that weren’t banks for the first time since the 1930s. Total central bank lending exceeded $2 trillion for the first time on Nov. 6, 2008, reaching $2.14 trillion on Sept. 23, 2009.

More than a dozen other groups or companies filed friend- of-the-court briefs. Those arguing for disclosure of the records included the American Society of News Editors and individual news organizations.

“It’s gratifying that the court recognizes the considerable interest in knowing what is being done with our tax dollars,” said Lucy Dalglish, executive director of the Reporters Committee for Freedom of the Press in Arlington, Virginia.

“We’ve learned some powerful lessons in the last 18 months that citizens need to pay more attention to what’s going on in the financial world. This decision will make it easier to do that.”

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York).

To contact the reporters on this story: David Glovin in New York at dglovin@bloomberg.net; Bob Van Voris in New York at vanvoris@bloomberg.net.

Last Updated: March 19, 2010 16:15 EDT

also see  huffington post articles on this

Posted in bloomberg, citi, concealment, conspiracy, corruption, Dick Fuld, FED FRAUD, federal reserve board, G. Edward Griffin, geithner, hank paulson, jpmorgan chase, lehman brothers, naked short selling, RON PAUL, scamComments (0)


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