I don’t know about you, but doesn’t it seem that every player who sold subprime loans knew exactly what they were selling? Fraud?
Like everything else this will NOT lead to any criminal charges. Same old dance.
iWATCH News-
Federal authorities are investigating possible fraud at General Electric Co.’s former subprime mortgage arm amid increased public pressure to hold Wall Street accountable for its role in the financial crisis.
The FBI and the U.S. Justice Department are looking into potentially criminal business practices at Burbank, Calif.-based WMC Mortgage Corp. during the home-loan boom, according to four people with knowledge of the investigation. They declined to be identified because of the sensitivity of the investigation.
GE’s slogan couldn’t have been much truer than this.
The D & O Diary-
In a January 12, 2012 opinion that quotes from (and relies upon) former Treasury Secretary Henry Paulson’s credit crisis memoirs, Southern District of New York Judge Richard Holwell granted in part and denied in part the motion to dismiss in the subprime and credit crisis related securities class action lawsuit that investors had filed against General Electric, certain of its directors and officers, and its offering underwriters. A copy of Judge Holwell’s opinion can be found here.
Background
As discussed in greater detail here, the plaintiffs first filed their action in March 2009, alleging that the company had failed to disclose information regarding the company’s health and the health of its financial subsidiary, GE Capital, at the height of the financial crisis. As Judge Holwell summarized it, the plaintiffs allege that “during a time when the financial markets were crumbling and companies across the United States were scrambling to disclose their holdings in subprime loans, GE withheld information regarding its substantial holdings in subprime and non-investment grade loans and touted GE as safe in comparison to its competitors, despite the fact that GE was also feeling the impact of the financial crisis.”
Michael Hudson, continues his great series into the subprime fraud mess, this time GE’s turn!
iWATCH-
For General Electric Co., hawking subprime mortgages was a long way from making light bulbs and jet engines.
That didn’t stop the industrial giant from jumping into the subprime business in 2004, lending blue-chip respectability to the market for risky home loans by paying roughly half a billion dollars to buy California-based WMC Mortgage Corp.
What GE got in the bargain, former WMC employees say, was a place where erstwhile shoe salesmen, ex-strippers and even a former porn actress could sign on as sales reps and make big money pushing home loans. WMC’s top salespeople earned a million dollars a year or more and lived fast, swigging $1,000 bottles of Cristal and wheeling around in $100,000 Ferraris and Bentleys.
Banks blow up mortgage settlement talks, despite Iowa AG Tom Miller’s begging and whimpering!!
TIME-
The five biggest mortgage servicers have cancelled a planned negotiating session with representatives of the 50 State Attorneys General in apparent protest over a federal regulator filing suit against them, a source familiar with the matter tells TIME.
The banks canceled the meeting on Tuesday afternoon in protest over the announcement last Friday that the Federal Housing Finance Agency would bring a broad case against 17 firms, including those in talks with the State AGs. The FHFA, which oversees mortgage giants Fannie Mae and Freddie Mac, alleges the firms violated securities law by misrepresenting the value of bundles of high-risk mortgages they sold. FHFA did not say how much the case might be worth, but outside analysts have said it could potentially produce billions of dollars in compensatory damages from the firms.
Long before the banks started evicting delinquent homeowners, Wall Street, it appears, used robo-signers to ink mortgage deals that would eventually cost investors tens of billions of dollars and in part led to the financial crisis.
According to lawsuits filed last week by the U.S.’s Federal Housing Financing Agency, one individual was used by three different banks to sign off on 36 different mortgage bond deals in 2006 alone. Many of the deals contained as many as 4,000 home loans. Yet, according to the lawsuits, the individual Evelyn Echevarria signed documents attesting to the fact that all the loans – well over 100,o00 in 2006 alone
This is a great article written by Kevin Villani who was senior vice president and chief economist at Freddie Mac from 1982 to 1985.
American Banker-
In the 1980s Freddie Mac had a marketing campaign “The Gnomes Know,” touting their expertise in mortgage markets. Now the Federal Housing Finance Agency has filed a $200 billion lawsuit against 17 of the nation’s largest mortgage lenders arguing that during the subprime lending debacle of the last decade the gnomes didn’t know!
Last Friday the U.S. regulator, the Federal Housing Finance Agency (FHFA), which has the oversight responsibility of Fannie Mae and Freddie Mac, sued 17 large banks and financial institutions relating to losses on approximately $200 billion of Fannie Mae and Freddie Mac subprime bonds.
Now, let me be clear right from the start. I am no apologist for the banks. And historically my tendency has been to support better financial regulation and even the Democratic Party through my voting preference.
However, enough is enough. At this point in time the Government and the FHFA have no right to sue the banking industry on behalf of Fannie Mae and Freddie Mac. That is a joke.
If William K. Black and Janet would only team up to write a book?
HuffPO-
There were many factors that contributed to our recent financial bubble: deregulation, cheap money from the Fed, failure to enforce remaining regulations, crony capitalism, hubris, speculation, leverage, and fraud among other problems. While fraud wasn’t the only issue, it was and is a significant contributor to the credit bubble. Restraining fraud is a necessary but not sufficient condition for a sound financial system. Congressional investigations in recent years have put ample evidence of fraud in the public domain.
To illustrate just one type of malicious mischief, Senator Carl Levin (D. Mich.), Chairman of a senate investigative panel, issued a memo stating that Goldman ” magnified the impact of toxic mortgages.” The Wall Street Journal reviewed data showing that a $38 million subprime-mortgage bond created in June 2006 was referenced in more than 30 debt pool causing around$280 million in losses to investors by 2008. In other words, Goldman kept repackaging, reselling or protecting (buying credit default protection on) losers. It took the wrong kind of nerve for Goldman’s CEO to say he was doing “God’s work.”
Big U.S. banks in talks with state prosecutors to settle claims of improper mortgage practices have been offered a deal that is proposed to limit part of their legal liability, the Financial Times reported on Tuesday.
The FT said state prosecutors have proposed a deal to limit part of the banks’ liability in return for a multibillion-dollar payment.
The talks aim to settle allegations that banks including Bank of America (BAC.N), JPMorgan Chase (JPM.N), Wells Fargo (WFC.N), Citigroup (C.N) and Ally Financial (GKM.N). seized the homes of delinquent borrowers and broke state laws by employing so-called “robosigners”, workers who signed off on foreclosure documents en masse without reviewing the paperwork.
Reading the FHFA complaints against many of the world’s largest banks is a fascinating and troubling process for anyone that understands “accounting control fraud.” The FHFA, a federal regulatory agency, sued in its capacity as conservator for Fannie and Freddie. Its complaints are primarily based on fraud. The FHFA alleges that the fraud came from the top, i.e., it alleges that many of the world’s largest banks were control frauds and that they committed hundreds of thousands of fraudulent acts. The FHFA complaints emphasize that other governmental investigations have repeatedly confirmed that the defendant banks were engaged in endemic fraud. The failure of the Department of Justice to convict any senior official of a major bank, and the almost total failure to indict any senior official of a major bank has moved from scandal to farce.
The FHFA complaints are distressing, however, in their failure to explain why the frauds occurred and how an accounting control fraud works. The FHFA complaint against Countrywide is particularly disappointing because …
Again, who gave the green light to eliminate the need for assignments and to realize the greatest savings, lenders should close loans using standard security instruments containing “MOM” language back in April 26, 1999?
This was approved by Fannie Mae and Freddie Mac which named MERS as Original Mortgagee (MOM)!
Open Market-
“U.S. is set to sue dozen big banks over mortgages,” reads the front-page headline in today’s New York Times. The “deck” below the headline explains that that the Federal Housing Finance Agency, which oversees the government-sponsored enterprises Fannie Mae and Freddie Mac, is “seen as arguing that lenders lacked due diligence” in the loans they made.
A more apt description would probably be that Fannie and Freddie are suing the banks for selling them the very loans the GSEs helped designed and that government mandates encourage — and are still encouraging them to make. These conflicted actions are just one more of the government’s contributions to the uncertainty that is helping to keep unemployment at 9 percent.
Strangely the author of the Times piece, Nelson Schwartz, ignores the findings of a recent blockbuster
FHFA suit stops short of going nuclear, ignores the biggest flaw in securitization/REMICs – failure to properly convey the notes….instead, FHFA sez loans were xferred properly to trust, to prevent 100% taxation 4 failure 2 comply w/ IRC’s REMIC requirements. Cute…I worry that this is an attempt to fix / limit total bank exposure by getting uncontested ruling that REMIC provisions were followed…
What? Why is “WELLS FARGO” not listed? Let me know when they get to “W”.
FHFA Sues 17 Firms to Recover Losses to Fannie Mae and Freddie Mac
Washington, DC — The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (the Enterprises), today filed lawsuits against 17 financial institutions, certain of their officers and various unaffiliated lead underwriters. The suits allege violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities (PLS) to the Enterprises.
Complaints have been filed against the following lead defendants, in alphabetical order:
The cases are Federal Housing Finance Agency v. Bank of America Corp. (BAC), 11-CV-6195; FHFA v. Barclays Bank Plc., 11-CV- 6190; FHFA v. Citigroup, 11-CV-6196; FHFA v. Credit Suisse Holdings (USA) Inc., 11-CV-6200; FHFA v. Deutsche Bank AG, 11- CV-6192; FHFA v. First Horizon National Corp., 11-CV-6193; FHFA v. Goldman, Sachs & Co., 11-CV-6198; FHFA v. HSBC North America Holdings Inc., 11-CV-6189; FHFA v. JPMorgan Chase & Co., 11-CV- 6188; FHFA v. Merrill Lynch & Co., 11-CV-6202; FHFA v. Nomura Holding America Inc., 11-CV-6201; FHFA v. SG Americas Inc., 11- CV-6203, U.S. District Court, Southern District of New York
Consultant, Writer, Senior Fellow with The Campaign for America’s Future
Posted: August 5, 2010 06:55 PM
The Justice Department and the Securities and Exchange Commission have broad powers to root out and punish financial fraud. The Interagency Financial Fraud Task Force, formed last November, is an Obama-era innovation that enhances the government’s ability to track down financial criminals. As we look back on the last two years’ revelations about Wall Street misbehavior, then, it seems reasonable to ask the question:
What’s a banker gotta do to get arrested in this town?
We’re not talking about the “show up with your attorney and we’ll work out a settlement” kind of arrest, either. We mean the pull-them-from-the-boardroom, handcuff-wearing, hands-on-the-police-car perp walk sort of arrest. Enforcement actions seem few and far between, and when they do come around the settlement is usually far too small to deter future crime.
But a review of 49 charges brought this year by the SEC shows that the majority of their targets were “ABB” — “anybody but bankers” — and that only eight charges were directly related to the fraud that trashed the economy. Most of those eight charges involved bit players, and penalties for the two major fraudsters involved were so light that they gave would-be malefactors no good reason to change their evil ways.
The SEC even charged a psychic with fraud after he claimed he could predict what would happen in the stock market. (Of course he was a fraud! A real psychic would’ve known they were investigating him and left town.)
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