On April 23, 2012, the plaintiff in State of Ohio ex rel. David P. Joyce, Prosecuting Attorney of Geauga County Ohio v. MERSCORP, Inc., et al., N.D. Ohio Case No. 1:11-cv-02474, filed its motion seeking an order certifying the action as a class action, appointing Geauga County as class representative, and appointing plaintiff’s counsel, the New York law firm of Bernstein Liebhard LLP, as class counsel. The plaintiff argues that the case, which the plaintiff is attempting to bring on behalf of all 88 Ohio counties for relief relating to the allegedly unlawful failure of MERS and its member institutions to record millions of mortgages and mortgage assignments throughout Ohio, meets all requirements of Rule 23(a) and that certification is proper under any one of the 3 subsections of Rule 23(b). The plaintiff hopes to persuade the court that the MERS/member institution policy concerning recordation of mortgages and assignments is a “common scheme or course of conduct” that has given rise to claims “ideally suited for class certification.”
Bank Hapoalim has filed a massive $720 million suit against Bank of America, Merrill Lynch and Countrywide over its losses in the U.S. subprime crisis, alleging that the U.S. institutions misled and defrauded it.
Among Israel’s financial institutions, Hapoalim suffered the worst losses in the subprime crisis due to its investments in mortgage-backed securities.
Between 2005 and 2007, the bank, led by Shlomo Nehama and Zvi Ziv, snapped up mortgage-backed securities in an attempt to meet its goal of a 15% return on equity by 2007.
Making Margin Call: An Interview with Writer/Director J.C. Chandor
by Jake Bernstein ProPublica, Nov. 23, 2011, 6 a.m.
The genesis of Margin Call occurred in 2005 when the film’s writer and director J.C. Chandor and some friends dabbled in New York’s red-hot real estate market. To their surprise, a bank lent them $10 million, with few questions asked, to buy a building on the edge of SoHo. The plan was to renovate the property, but they quickly found themselves in over their heads. In 2006, the godfather of one of the group — a former investment banker whose unease about the market was growing — told them, forcefully, they should sell. What seemed like a defeat at the time proved to be a blessing when the market collapsed.
“That was the first nugget,” Chandor says. “That idea of the guy who is walking around and thinks he knows what is about to happen but the rest of the world is pressing the accelerator button.”
The son of a former Merrill Lynch banker and visual art consultant, Chandor grew up in banker communities in New York and London, which afforded him insights into the world at the epicenter of the crisis. With a background in commercial and documentary filmmaking, he wanted to write a movie that was cheap enough that he could convince someone to let him direct it. The budget would require it to be confined in place and time, and probably a character study.
“I came up with this conceit of locking these investment bankers in on the night when one of them thinks that he has found out that the world is coming to an end,” he says.
After carrying around the idea for the movie in his head for more than a year, the actual writing came quickly. “I wrote the thing in four days under tremendous duress, frankly,” he says. “I was doing job interviews to go to work in a totally different field.”
His goal of a small movie ended up being a boon rather than a constraint for the type of story he wanted to tell. A short shooting schedule of 17 days and the complex characters in his script attracted a stellar cast.
“What I did was essentially say, let’s just take a limited place and time where these characters are so paranoid about this piece of information getting out that there is no new information,” he says. “There is only one piece of information, and they know that they are the first people to have it, so in a weird way they don’t care what the rest of the world is doing for that 24 hours. They just care about what they are going to do.”
We caught up with Chandor for an interview last week to discuss the ideas behind the movie and the challenges of making it. What follows are edited excerpts from that conversation.
JC: The film for me was supposed to be a tragedy, not the horrible tragedy of someone dying but a tragedy of lost potential. These are the best and brightest that we have. We don’t tax our universities because they are supposed to provide society with a service, which is educated youth ready to come out and work. The abuse that I’ve seen over the last 14 to 15 years since I’ve graduated from college, the manipulation of that system, that training ground, essentially leading toward making money for money’s sake as opposed to banking that is actually serving a purpose was the heart of the movie for me.
Don’t get me wrong. I’m a capitalist. Some wanted this film to be more of an indictment of these people, and that’s not where I come from, obviously. A misuse of tremendous potential is what I wanted the film to be about, in a sort of sad way.
JB: What was so striking about the movie is how there is no hero who comes and saves the day at the end.
JC: In the summer of 2009, we had a largely different, but great cast. It was one year closer to the initial disaster, but it was very difficult to raise money to go make a movie. We had a chance to go out and shoot this movie. If Zachary Quinto’s character had stood up and called in the SEC, and [Kevin] Spacey’s character had been perp-walked out of the building à la Wall Street I, [then] I had a check to go make the movie. It was a very simple change at the end of the movie. It’s often what happens with financiers that come on.
My personal belief was that what drew the actors — which was the only reason that person was offering me the money to make it — was the gray area in which the whole thing takes place. Actors love to play — and they don’t often get the chance to do it, obviously — conflicted characters who don’t always do the quote-unquote thing you think they are going do. So there was the practical part of me that was like, I don’t know if all of these actors will stick with me if I did that.
Then there really was the main reason. I strongly, strongly felt that you did not get a systemic collapse where the tip of the sword of capitalism had to be socialized — which was of course what had just happened, where the government basically had to come in and take over the banking sector — you don’t get that happening just on individual failure.
JB: What is a 17-day shooting schedule like?
JC: It is very unpleasant. It was a union shoot, so there are rules. It is a 12-hour day, which means you are actually active on a set for 12 hours. And it was a 6-day week. These are all things that make things cheaper… Your crew is actively working 12 to 13 hours a day, sometimes more pending overtime. Your average studio movie is anywhere from 45 to 90 days. And your average independent film is 35 days. Again, though, we would never have gotten the cast if I had asked them to come 35 days — two months of the summer and spring, which is the prime shooting time when they are being offered studio movies.
We were constantly rolling. The major, major upside to that — again, embracing your weakness — I had classically trained, unbelievably driven, hyper-, hyper-talented and hyper-experienced actors. The least experienced person on my movie was Penn Badgley, who has been a professional actor supporting himself and part of his family for 10 years. So everyone there was a professional. So the neat thing is I threw those people, who in their profession are very similar to the people that the movie was about: these type-A, very driven, unbelievably trained, never-supposed-to-show-anyone-that-they-are-panicking people on the worst day of their lives. Not that the shoot was the worst day of their lives, because it actually wasn’t at all, but from a challenging standpoint — to be doing 12 pages in a day is not something that Jeremy Irons is used to doing. As I was editing, you started to see moments of underlying panic in the performance at times. The performances felt very alive.
JB: Paul Bettany’s performance is fantastic. In an odd way he is the purest character.
JC: For people who have been in that world or know that world, he is the character that people from a performance standpoint are so drawn to because — sounds sort of silly to say — because the character is supposed to be on the surface a kind of jerk, but it really is most subtle. As a key trader on the floor, your life and your job are very simple. It is a very simple set of tasks. It’s not simple to be good at it, but aspects of it are very simple. He is sort of the assassin. He requires that those behind him, the generals, are making the right choices, and that is all he ever expects for himself. It’s neat because audiences are kind of drawn to him in a way that you would never think for the way that character is. If you actually read that part, it’s a despicable kind of character, some of the things he says, but the way he humanizes it — not even humanizes it but made it real — was a great performance.
JB: You really captured the tribal nature of Wall Street where the only value besides greed is loyalty.
JC: Spacey came a couple of weeks ahead of time. He is a very liberal guy, Spacey, so his original take on the character was far less empathetic than the one I ended up trying to get him to give me. For a couple of days we went to visit exactly that guy in a bunch of banks. At that point, when we went and visited them, they were in total lockdown on their salaries because of the government coming in. They were literally not there for the money. They could have been making a lot of money somewhere else. But it was that they had convinced all their guys and gals to stay, and it was that tribal element that really ended up being what hurt them the most when this whole thing went down. I think Spacey embodied that — hopefully in a way that isn’t as overt as Bettany’s character. But the whole thing with the dog is essentially a diversion for him — in my mind, it’s probably not the way Kevin actually sees it — the whole thing with the dog is supposed to be this sort of absurdist human thing that we do when you are just totally grabbing on to an abstraction to not be thinking about what is actually the problem.
JB: I’m wondering if these insights into how Wall Street operates are only available through fiction?
JC: I can’t tell you when we were trying to raise the money for this movie, how many people came and said, “Isn’t this better served in a documentary? Isn’t someone else going to tell this story?” The main question I was getting at Sundance when we introduced the film was, “Do we need another Wall Street movie?” The first question I got at the press conference when I landed in Berlin was, “Why has there not been more American arts oriented on this topic?” This is something that has affected so many people in your country and around the world. Why aren’t there like 6 movies coming out of different facets?
My belief in doing this film was that out of fiction you actually get — maybe — these guys to sit and watch the movie. The movie obviously doesn’t have a lot of ER type details in it [such as numbers and figures]. And that was for a reason. There were more details in the film. As I was editing it and showed it to a couple of people, and thinking about it myself, that sort of Greek, so to speak, meant nothing to the average audience. You didn’t need it. It just made them feel dumb, basically, and potentially they stopped paying attention because of it. And interestingly, the insider audience started running numbers. They were running my math. They were cross checking what I was saying, and that was not where they need to be either.
When there is bad news, no one ever rushes to call me to tell me that I have been passed over for a job. That is not the first call my agent is looking to make. The minute there is any good news, you’ve got six voice messages on your machine and everyone wants it coming out of their mouth. So I tried to use that human nature kind of trick. This is obviously the worst news that all of these people had ever come across in their professional life, and so there was this total reticence to take any kind of ownership for it. Quinto’s character is the only guy who actually gets bullied into laying it out there, because it’s the CEO doing it to him. It was my out in not having to have all the math, to have all the details in there. Hopefully that allows the people in that world to get lost in the movie.
That line was what I was trying to walk. The only number in the entire movie [beside a brief trading scene near the end] … is at one point Simon Baker says $8 trillion. That [number] wasn’t potentially what they had on their books, that was a more systemic representation of what was moving around the world 2013 so that is the only number in the entire movie, which is of course kind of funny because it is a movie about numbers. But if you kept the movie moving forward you never had to go there.
JB: I wish we could do that!
JC: That’s where the whole fiction thing comes in. That was an experiment. The original script does have some numbers in there. And it actually felt sort of important to the actors. The actors were all a little taken aback — not when they saw the movie, interestingly — but when I told them after what was missing. When they were delivering their performances the number lines where ones that they in their minds had sort of given tremendous depth and worth to. But when they actually saw the movie they realized that it wasn’t necessary.
by Jake Bernstein ProPublica, Nov. 23, 2011, 6 a.m.
Spoiler alert: This article discusses key scenes from the film.
J.C. Chandor has embraced Rahm Emanuel’s dictum “never let a serious crisis go to waste.” The 37-year-old writer and director used the financial crisis as a springboard to create the most insightful Wall Street movie ever filmed. Margin Call captures a day in the life of a Lehman Brothers-like bank as it scrambles to avoid falling into the first cracks of the financial crisis. Briskly paced and marvelously acted, the movie reveals how large financial institutions operate and the motivations of the people who work within them.
Margin Call should not be confused with journalism. It is not a precise overlay of the financial crisis. You’ll never hear the words collateralized debt obligations uttered in the movie. As the reporting [1] I did with my colleague Jesse Eisinger showed, the Wall Street behavior that helped create the financial crisis was often much worse than what’s depicted in the movie. Chandor isn’t looking for villians or lengthy explanations. He’s mining deeper truths than the intricacies of credit default swaps. The societal costs of high finance, the power of self-rationalization, and the easy embrace of personal corruption is his terrain.
As reporters covering the beat know, Wall Street is a reluctant participant in introspection. Journalists investigating the Street have to pierce a code of omertà, borne of the fear of lawsuits and federal investigations. No one wants to have the reputation of being a snitch in an industry where hiring and bonuses are based on relationships as much as quarterly results. The truth is even more tightly held when it hides the origins of financial disaster, but even in the best of times, these are not, by nature, navel gazers. Traders and market makers are like sharks, always wanting to move forward, onto the next deal. There is no percentage in looking back.
All you need to know about the moral universe Margin Call inhabits is on display in the opening scene of the movie. The downturn has begun. The firing squad — represented by two women in identical business suits — arrives on the trading floor trailed by underlings carrying cardboard boxes to cart away personal effects. When they come into view, a series of swift reactions plays across the face of Will Emerson, a senior trader acted brilliantly by Paul Bettany. First fear. Then dismay. And finally, relief and dismissal. After 80 percent of the floor is axed, Emerson’s boss, Sam, a wan Kevin Spacey, gives a pep talk to the traders left standing. “They were good. You are better. Now they are gone. They are not to be thought of again.”
Among the casaulties is the risk manager for the trading group, Eric Dale, played by Stanley Tucci. On the way out the door, Dale tells his young protege, Peter Sullivan, that he has been working on something important. As the elevator closes, he hands Sullivan a zip drive and says cryptically, “Be careful.”
Sullivan, played by Zachary Quinto, who also helped produce the movie, waits until the office clears for the night and then dives into the figures. To his horror, he discovers the bank is massively overleveraged. If trends continue, projected losses are much greater than the value of the firm. Upon learning how dire the situation has become, the CEO John Tuld, portrayed by a scene-chewing Jeremy Irons, says, “So what you are telling me is that the music is about to stop and we are going to be left holding the biggest bag of oderous excrement ever assembled in the history of capitalism.”
Sullivan is the questioning heart of Margin Call. He has a doctorate in engineering with a speciality in propulsion — literally a rocket scientist. And like so many of the best and brightest of his generation, he turned to Wall Street, where Chandor clearly believes his gain is society’s loss. When one of his superiors asks Sullivan why he has foresaken engineering, he responds: “It’s all just numbers really, just changing what you are adding up, and to speak freely, the money here is considerably more attractive.”
Sullivan operates in the constricted space of the Wall Street risk manager. Risk managers and accountants are among the few who actually know what the numbers mean. They see the whole picture. It’s a running joke through the movie that Sullivan’s bosses, right up to the CEO, don’t understand the financial wizardry behind the products they make and sell. When confronted with Sullivan’s analysis, Sam says, “Oh Jesus, you know I can’t read these things. Just speak to me in English.”
The risk manager is not in sales, which is the heart and soul of the institution. He or she only offers recommendations. Throughout Margin Call there are a number of references to warnings unheeded. And indeed, in the real world, the success of investment banks at subverting their risk management rules correlated nicely with how badly they fared when the crisis hit. In the ultimate irony, when it’s time for someone to take the fall for the firm’s risk taking, it’s the head of risk management, played by Demi Moore who is pushed to the scaffold.
Sullivan and his side-kick Seth, played by Penn Badgley, are still new enough to the system to be doubtful of its utility. Seth is enamored with the money Wall Street offers and particularly impressed by his boss Will Emerson, who pulled down $2.5 million the previous year. They briefly wonder whether that’s “right,” but push the unwelcome thought away unanswered.
When Emerson tells the eager young men that “you learn to spend what is in your pocket” and that most of his money is gone, they are incredulous. He itemizes his expenses for them, including $76,520 for hookers, booze and dancers. Their adulation only increases when he admits he claimed most of that back as entertainment expenses.
Later when Seth bemoans the fact that normal people will be hurt by their actions, Emerson’s ferocious response is shocking both for its amorality and its kernels of truth.
“If you really want to do this with your life you have to believe that you’re necessary. And you are. People want to live like this in their cars and their big fucking houses that they can’t even pay for? Then you’re necessary. The only reason they all get to continue living like kings is because we’ve got our fingers on the scales in their favor. I take my hand off and the whole world gets really fucking fair really fucking quickly and nobody actually wants that. They say they do but they don’t. They want what we have to give them, but they also want to play innocent and pretend they have no idea where it came from. That’s more hypocrisy than I’m willing to swallow. Fuck them. Fuck normal people.”
Faced with the pile of excrement on the books, the archly named Tuld (Lehman Brothers CEO was Dick Fuld) decides the bank must unload it, and quickly, before customers wise up. At this point, the movie could just as easily be called, “Damage Control: When Greed Turns to Fear.”
Sam tries to talk Tuld out of his plan. “If you do this, you will kill the market for years. It’s over. And you are selling something that you know has no value,” he says.
Tuld responds with the excuse every Wall Street executive used when investigators came calling after the shit hit the investors: “We are selling to willing buyers at the current fair market price so that we may survive.”
In the real world, the buyers were not as sophisticated and the deals not as transparant as bankers claimed.
The House always wins, Emerson tells his young charges. The corollary is that everybody is for sale. Indeed, anyone who has qualms in the movie finds the right price for their acquiesence. In this world, traders earn bonuses for screwing their customers. Tucci’s character is told he can lose his health care and stock options — or keep them while sitting quietly in a room for a day at $176,476 an hour. “It didn’t seem like much of a choice,” he says.
Beyond the sheer entertainment value of the movie, Chandor’s biggest coup is his willingness to indict a system rather than simply blame the individuals within it. Ultimately, Margin Call is the story of a Wall Street that has evolved from an economic helpmate to an economic predator.
Me thinks this just sunk the Foreclosure Fraud Settlement ship!
California is trying to determine whether BofA and its Countrywide Financial subsidiary sold investments backed by risky mortgages to investors in California under false pretenses, a source says.
Oh Hella Yeah…they did & They everyone knows this!
La Times-
Investigators with the state attorney general’s office have subpoenaed Bank of America Corp. in connection with the sale and marketing of troubled mortgage-backed securities to California investors, according to a person familiar with the probe.
The state is trying to determine whether the bank and its Countrywide Financial subsidiary sold investments backed by risky mortgages to institutional and private investors in California under false pretenses, according to the person, who was not authorized to speak publicly and requested confidentiality.
Q. At the point in time of this board meeting, though, you were relating to the board that you felt you had a commitment from the Fed and the Treasury to make good on whatever harm is caused by the increased losses at Merrill Lynch; is that right?
A. I had verbal commitments from Ben Bernanke and Hank Paulson that they were going to see this through, to fill that hole, and have the market perceive this as a good deal.
MR. CORNGOLD: Isn’t the only way to fill that hole, though, to give you money, not to give you money that you would have to pay back at some interest rate with some potential equity interest, too?
THE WITNESS: No. I think you have to separate the fact that, yes, there is still some short-term paying -it’s more short-term paying now than we would have had had all this not happened, but longer term we still see a strategic benefit. So we saw it as a short term versus a long term impact on the company.
MR. CORNGOLD; When you entered into the initial contract with Merrill Lynch did you get a fairness opinion about the transaction?
THE WITNESS: Yes.
MR. CORNGOLD: From whom?
THE WITNESS; Chris Flowers something.
MR. CORNGOLD: And did you get a fairness opinion from anyone about the transaction that you entered into with the federal government and the Fed?
THE WITNESS: No. MR. CORNGOLD: Did you consider whether you had a legal obligation to do that? THE WITNESS: I would rely on the advice of the general counsel for that.
MR. CORNGOLD: But when you say that, does that mean that you asked and got advice, or that you didn’t ask but relied THE WITNESS: I would rely on somebody bringing that question forth, and nobody did.
Q. Did you ask anyone to look into whether the oral, verbal commitments from the Fed and Treasury were enforceable?
A. No. I was going on the word of two very respected individuals high up in the American government.
Q. Wasn’t Mr. Paulson, by his instruction, really asking Bank of America shareholders to take a good part of the hit of the Merrill losses?
A. What he was doing was trying to stem a financial disaster in the financial markets, from his perspective.
Q. From your perspective, wasn’t that one of the effects of what he was doing?
A. Over the short term, yes, but we still thought we had an entity that filled two big strategic holes for us and over long term would still be an interest to the shareholders.
Q. What do you mean by “short term”?
A. Two to three years.
Q. So isn’t that something that any shareholder at Bank of America who had less than a three-year time horizon would want to know?
A. The situation was that everyone felt like the deal needed to be completed and to be able to say that, or that they would impose a big risk to the financial system if it would not.
MR. LAWSKY: When you say “everyone,” what do you mean?
THE WITNESS: The people that I was talking to, Bernanke and Paulson.
MR. LAWSKY: Had it been up to you would you made the disclosure?
THE WITNESS: It wasn’t up to me.
MR. LAWSKY: Had it been up to you.
THE WITNESS: It wasn’t.
MR. CORNGOLD: Why do you say it wasn’t up to you? Were you instructed not to tell your shareholders what the transaction was going to be?
THE WITNESS: I was instructed that “We do not want a public disclosure.”
MR. CORNGOLD: Who said that to you?
THE WITNESS: Paulson.
MR. CORNGOLD: When did he say that to you?
THE WITNESS; Sometime after I asked Ben Bernanke for something in writing.
Q. When did that occur?
A.Which one?
Q. When did Mr. Paulson state that he did not want a public disclosure?
A. It was sometime late in the year. I think it’s actually in the minutes.
MR. LIMAN:If you have the next set of minutes it might help the witness.
Q. What’s your best recollection of what
Mr. Paulson said to you on that point?
A. That was the conversation that I mentioned that I went to Bernanke to ask the question, and he didn’t call me back but Hank did. The request was for a letter stating what they would do, and he had those two elements in there. But the thing that we’re talking about is that he said “We do not want a public disclosure.”
Q. A public disclosure of what?
A. Of what they were going to be doing for us until it was completed.
Bank of America’s potential liability for bad mortgages — in the tens of billions of dollars — is well known. But Bank of America is haunted by other demons from the financial crisis, the most significant one being a lawsuit arising from its troubled Merrill Lynch acquisition.
This lawsuit, brought by Bank of America shareholders, claims that Bank of America and its executives, including its former chief executive, Kenneth D. Lewis, failed to disclose what would be a $15.31 billion loss at Merrill in the days before and after the acquisition. The plaintiffs contend that this staggering loss was hidden to ensure that Bank of America shareholders did not vote against the transaction.
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
New York Attorney General Eric Schneiderman’s office has taken testimony from 53 witnesses in its investigation into Bank of America Corp. (BAC)’s 2008 acquisition of Merrill Lynch & Co., a federal judge said.
U.S. District Judge Kevin Castel in Manhattan said in an order today that “there have been 53 examinations under oath by the NYAG” in its investigation. The witnesses weren’t identified in the order, which involved evidence gathering in the case.
Another headache from the financial crisis is flaring back up for Bank of America Corp.
New York state Attorney General Eric Schneiderman has issued subpoenas seeking new depositions from the Charlotte, N.C., bank’s chief executive and other current and former executives, according to people familiar with the situation.
The subpoenas are a sign that Mr. Schneiderman, who became New York’s top law-enforcement official this year, doesn’t intend to drop the civil-fraud investigation of Bank of America begun more than a year ago under predecessor Andrew Cuomo.
Mr. Cuomo, now the governor of New York, accused Bank of America, former Chief …
It should be readily apparent that there are an overabundance of reasons for Bank of America’s CEO, Bryan Moynihan, to be regarded as a massive rear end in a province undeniably replete with rear ends of utterly mammoth proportion. Even the adjectives in that last sentence don’t begin to do the nature of his posterior justice.
To begin with, let’s just acknowledge that Moynihan is a corporate lawyer. He graduated in 1981 from Brown University… a history major that co-captained the rugby team. He then went on to Notre Dame Law School.
In 1993 he went to work at Fleet Boston as deputy general counsel, but after Bank of America acquired Fleet in 2004 Moynihan became the bank’s president of global wealth and investment management, and from October 2007 to December 2008, he served as the bank’s president of global corporate and investment banking. But from December 2008 to January 2009, Moynihan once again returned to his roots, serving as general counsel for Bank of America, and he became CEO of Merrill Lynch after its oh-so-well-thought-out-and-executed sale to Bank of America in September 2008.
When Wall Street’s biggest firms settled with regulators in April 2003 over charges of fraudulent stock research, the industry promised a new era of independence. Marc Lackritz, president of the Securities Industry Association, promised Wall Street would ensure that “the quality and integrity of financial analysis is beyond reproach.”
The recent highly critical report by federal regulators on Fannie Mae’s accounting practices, though, may rekindle questions about Wall Street’s ability to issue unbiased research. Fannie is one of Wall Street’s best clients, issuing close to $2 trillion in debt to provide cheap loans for home buyers, and those figures don’t include other huge fees Wall Street earns in helping Fannie. Fannie’s top five underwriters have earned close to $700 million in fees since 1999, according to Thomson Financial. Those same firms have provided continuing upbeat assessments despite growing signs Fannie was facing financial difficulties. Merrill Lynch, Fannie’s largest underwriter, maintained its “buy” rating last week. A Merrill spokesman said the firm’s research is objective, adding: “Our buy rating is in line with the consensus of research on this company.” Other leading underwriters–Goldman Sachs, Lehman Brothers, Morgan Stanley, and JPMorgan–declined to comment.
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