Federal judge Jed Rakoff, a former prosecutor with the U.S. Attorney’s office here in New York, is fast becoming a sort of legal hero of our time. He showed that again yesterday when he shat all over the SEC’s latest dirty settlement with serial fraud offender Citigroup, refusing to let the captured regulatory agency sweep yet another case of high-level criminal malfeasance under the rug.
It won’t be fun for Citigroup Inc. and the Securities and Exchange Commission to defend their proposed $285 million settlement at a Wednesday court hearing ordered by a very skeptical federal judge.
WSJ-
U.S. District Judge Jed S. Rakoff could kill the deal if he doesn’t like what he hears.
But coming up with the proper penalties to end civil enforcement cases by the SEC is complicated.
SEC officials consider nine factors, including losses suffered by investors as a result of the alleged wrongdoing. The agency also weighs how much the company benefited from the behavior and whether investors will be …
Biden, Schneiderman and a few other AGs see it differently. They have been insisting on further investigations before any settlement is reached. The charges in Biden’s suit against MERS include a series of allegations based on his investigations to date. Among them:
• Hiding the true mortgage owner and removing that information from the public land records.
• Creating a systemically important, yet inherently unreliable, database that created confusion and inappropriate assignments and foreclosures of mortgages.
• Failing to ensure the proper transfer of mortgage loan documentation to the securitization trusts, which may have resulted in the failure of securitizations to own the loans upon which they claimed to foreclose. (This is called “securities fail” and is the theory that allows put backs that crush the bank/originators.)
• Initiating foreclosures in the name of MERS without authority to do so or without appropriate controls to ensure the actions were being carried out by the actual owner of the mortgage.
• Allowing the entry and management of data by those MERS members who are identified as owners or servicers in the MERS System, instead of controlling entry and management itself.
• Initiating foreclosure actions in which the real party in interest was hidden, thus preventing homeowners from ascertaining who owned their mortgage in order to challenge whether or not they had a right to foreclose and limiting their legal defenses.
Again, stay tuned. Together, Judge Rakoff and Attorney General Biden are finally demanding much of the information we need to truly reform Wall Street.
Oct. 19 (Bloomberg) — Citigroup Inc. has agreed to pay close to $300 million to resolve U.S. Securities and Exchange Commission claims that it misled investors about a financial product linked to risky mortgages, according to a person with direct knowledge of the matter.
The settlement is subject to approval by the SEC commissioners, who were scheduled to vote on it today, the person said, declining to be identified because the matter isn’t public. One Citigroup executive and an employee from another firm involved in the deal are also named in the SEC’s claims, according to the person.
The Securities and Exchange Commission is warning staffers that their personal brokerage account information may have been compromised, after it uncovered security flaws with an ethics compliance program.
The SEC put the program in place after its internal watchdog raised concerns about possible insider trading among SEC staffers.
Washington, DC – The SEC Inspector General has completed a six-month investigation into allegations of conflict of interest against SEC’s former general counsel, David Becker, concerning his role in the Commission’s work relating to the victims of the Bernie Madoff Ponzi scheme. The IG’s final report was issued publicly today. Ranking Member Elijah E. Cummings issued the following statement:
“In its report, the IG’s office found sufficient evidence of Mr. Becker’s conflict of interest to call into question the integrity of the process used by the Commission to decide how to value fictitious profits made under the Madoff scheme. The IG also found that procedures at the SEC ethics office broke down and failed to prevent a conflict of interest from potentially tainting the agency’s work.
“I believe the victims of the Madoff scheme deserve to know that the SEC’s decision in this case was not tainted by conflicts of interest. The IG recommended that the Commission take a second look and conduct a revote of its decision. I strongly urge the Commission to take these appropriate steps in order to give Madoff’s victims that peace of mind.
“I hope that the Commission will adopt the IG’s other recommendations as well. I am encouraged that Chairman Schapiro asked SEC Inspector General H. David Kotz to open this investigation, which was a good faith effort on her part to get to get to the bottom of this issue. I am also encouraged that Chairman Schapiro decided last year to revamp the office of ethics, to hire new ethics counsel for the agency, and to provide greater resources to that office.”
Ally Financial Inc. said it expects to incur a $100 million second-quarter charge to cover mortgage losses posted by securitization trusts, and that it received subpoenas from regulators related to “certain mortgage activities,” according to a regulatory filing early Wednesday.
In an updated prospectus filed with the Securities and Exchange Commission, Ally said it made payments to such trusts of $152 million in the second quarter to cover losses related to …
(Reuters) – U.S. regulators could file civil fraud charges against some credit-rating agencies for their role in developing mortgage-bond deals that helped bring about the financial crisis, the Wall Street Journal reported, citing people familiar with the matter.
The Journal said the Securities and Exchange Commission was reviewing the conduct of companies including McGraw Hill’s Standard and Poor’s and Moody’s Investors Service owned by Moody’s Corp on at least two mortgage-bond deals.
Here’s a lesson for the government and Ally Financial in particular: With bank investors fretting about the potential costs of soured-mortgage claims, it is best to get the details out in the open.
That’s the opposite of how Ally and Freddie Mac handled a payment last year of $325 million by the firm to the mortgage company to settle mortgage-repurchase claims. Neither Ally, General Motors’ former financing arm now majority-owned by the government, nor government-owned Freddie disclosed the amount of the settlement when it occurred. The fact that a deal was struck at all was only disclosed by Ally and …
It Teetered, It Tottered, It Was Bound to Fall Down
This article was adapted from “Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon,” by Gretchen Morgenson, a business reporter and columnist for The New York Times, and Joshua Rosner, a managing director at the independent research consultant Graham Fisher. The book is to be published on Tuesday by Times Books.
MARC COHODES had heard the stories.
Heard how these guys would give a mortgage to anyone — even to a corpse, the joke went. How the place was run like a frat house.
You wouldn’t believe the things that go on there, his brother-in-law had told him.
Coincidence? Do you have a choice to remove MERS off your loan at the closing table?
Dont’cha wonder what was the point of saving on recording fees or the amount it take$ to defend MERS? Betcha either was well worth it as it made wall street CEO’s billions and others many millions.
Housing Wire-
Roughly half of the mortgages owned or guaranteed by Fannie Mae are registered in the Mortgage Electronic Registration System name, according to a filing by the government-sponsored enterprise last week.
Fannie’s guaranty book of business totaled $2.9 trillion at the end of the first quarter, meaning about $1.45 trillion of loans are registered in MERS’ name. The connection, Fannie said, poses a significant risk.
JPMorgan Chase & Co. (JPM) received a subpoena from the U.S. Securities and Exchange Commission over failed mortgages, a person familiar with the investigation said, as the agency probes banks including Credit Suisse Group AG (CS) for allegedly failing to share refunds from sellers of faulty debt.
“Credit Suisse is now the subject of an investigation by the Securities and Exchange Commission, which issued a subpoena this week seeking the same types of documents as MBIA seeks with this motion,” the bond insurance unit of Armonk, New York-based MBIA Inc. (MBI), said in the filing in New York State Supreme Court. The document, dated April 29, was filed today.
TWO individual investors just scored a remarkable win against Citigroup.
A few weeks ago, the pair was awarded a total of $54.1 million in a securities arbitration case against the Smith Barney unit of the company — the largest amount ever awarded to individuals in such a case, according to the Financial Industry Regulatory Authority.
I asked Eliot Spitzer what he would do with the regulatory system if he were king. He said he did not consider it probable that he would soon be king, but then he offered this simple fix:
LPS entered into a consent order (the “Order”) with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Office of Thrift Supervision (collectively, the “banking agencies”) in connection with their review of matters relating to the mortgage servicing industry, including the services provided to mortgage servicers by their DocX and Default Solutions operations.
LPS will engage an independent third party to conduct a risk assessment and review of our default management businesses and the document execution services we provided to Servicers from January 1, 2008 through December 31, 2010.
This is the second column in a series responding to Stephen Moore’s central assaults on regulation and the prosecution of the elite white-collar criminals who cause our recurrent, intensifying financial crises. Last week’s column addressed his claim in a recent Wall Street Journal column that all government employees, including the regulatory cops on the beat, are “takers” destroying America.
As the housing market deteriorated in April 2007, Fannie Mae Chief Executive Officer Daniel Mudd reported to Congress on his company’s health. The firm’s exposure to subprime loans, he told lawmakers, “remains minimal, less than 2.5 percent of our book.”
Within 18 months, U.S. regulators seized the government- sponsored mortgage firm and its smaller sibling, Freddie Mac, after losses on soured loans pushed them to the brink of insolvency. The two firms have drawn more than $150 billion in life support from the Treasury since then.
The Securities and Exchange Commission upheld a New York City Pension Funds request that big bank shareholders will get to vote on whether or not those vested financial institutions conduct foreclosure reviews.
Shareholders of Bank of America (: ), Citigroup (: ) and Wells Fargo (WFC: 31.27 -0.76%) will vote at annual meetings this spring, because of the ruling. Wells did not contend the proposal at the SEC. In January, The New York City Comptroller John Liu asked the boards of the banks and JPMorgan Chase (JPM: 45.20 -0.59%) to conduct the reviews to catch potential problems related to robo-signing and other documentation issues.
By Zachary A. Goldfarb and David S. Hilzenrath, Friday, March 18, 1:08 AM
The Securities and Exchange Commission is moving toward charging former and current Fannie Mae and Freddie Mac executives with violations related to the financial crisis, setting up a clash with the housing regulator that oversees the companies, according to sources familiar with the matter.
The SEC, responsible for enforcing securities laws, is alleging that at least four senior executives failed to provide necessary information to investors about the companies’ mortgage holdings as the U.S. housing market collapsed.
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