When Will the Public See the
Fleecing?
I played around with—but then dropped—a scheme to start an
online petition, using social media and other forum, to generate public
opposition to what I believe is a dangerous GOP legislative strategy to weaken
federal regulatory authority over large financial institutions, as evidenced by
the “Shelby package’’ of amendments, named for Senate Banking Committee
Chairman Dick Shelby (R-Ala), which sailed out of his committee on a strict 12
R's to 10 D's
vote.
I bagged my plan because I don’t think my petition would generate
the necessary attention, since the steady public stream of major bank
violations and fines, including several in the week before and after the Shelby
approval, hasn’t roused anybody’s ire.
I am certain many in the public read these stories but the
citizenry never seem to make the connection they—as taxpayers and financial—are
indirectly paying these fines, especially when their banks raise prices to
recapture revenue paid out to the government.
Where is the noise and outrage?
Does the public just not understand the major financial
screwing big banks are handing us?
I am not sure and recent actions give me little comfort.
Will the public—tired of endless major bank legal and
regulatory violations and the fines which don’t seem to stop the aberrance—ever
begin to realize that the Republican party is seeking to undertake major steps,
at the public’s
expense, to reduce government regulatory
control over these bank giants—no matter how many violations they commit, especially
when the American consumer picking up the pieces one way or another?
Billions and
billions of dollars in fine have been heaped onto large financial
institutions—for a variety of egregious acts--but the banks don’t stop corner
cutting and cheating and, asking for more relief. But nobody—save occasionally
Senator Elizabeth Warren (D-Mass.)-- gets super vexed and certainly this
Administration isn’t opting to send anyone to jail (a practice that has to
end if we want the shocking bank behavior to decrease or to stop).
As noted before, the Shelby bill contains moves to weaken the
control of the Board of Governors of the Federal Reserve and alter the
oversight of financial institutions between $51 Billion and $499 Billion in
asset size (those bank holding companies over $500 Billion—the really TBTF
institutions and those under $51 Billion saw most of the regulation
undisturbed.) While they are important to the institutions and the mortgage borrowing public, the details have been ignored in overall Shelby effort.
That Shelby action occurred amid10 days when the Department of Justice
fined five of the nation’s
largest banks $5.7 Billion for currency manipulation and two weeks after 2 other were fined more
than $2 Billion for violations. Late last week, the Bank of America was found
guilty of overcharging 70,000 veterans on their bank loans.
But, I hear little outrage or public dismay.
As Washington Post cartoonist Tom Toles suggested below, the public seems to reap a never ending “in
your face” from the financial institutions, which truly don’t need additional
GOP help to earn more money, rob and
steal from the nation (their customers) and crap all over their/our regulators.
(The Toles cartoon may not replicate in the blog space,
but—if it doesn’t—you can find it at this link.)
(Tom Toles)
Warren and
Shelby
A friend sent me a “twitter report” that some 300,000 people
had looked in on comments by Sen. Elizabeth Warren (D-Mass.) opposing Shelby
(and she and the other committee D’s
voted against it).
I guess that gives me a little bit of hope that the GOP skullduggery gets exposed, but not much.
I had a few arguments with my poker buddies over how good a
politician Shelby is, with me saying, “He’s
real good" and the others saying his bill shows he misread the terrain."
I think Dick Shelby is too smart a politician to put this
package out there to lose or be embarrassed.
He has the majority votes in the Senate and could attract
enough—to get to the magic sixty to stop a potential filibuster—just by sweetening his bill in
other financial services goodies, some D Senator might want.
Don’t underestimate him!
William Black, an author and consultant on financial services
matters, who teaches economics and law at the University of Missouri, delivered
a severe stomping to both the AEI’s
Peter Wallison and the Wall Street Journal editorial board, in a lengthy
article, appearing in “New Economic Perspectives.”
Black’s article is too lengthy to blog print in toto, but the
first few hundred words are worth reading and then finishing with the article
link, provided below.
http://neweconomicperspectives.org/2015/05/the-wsj-and-barrons-apologists-for-the-banksters-peddle-wallisons-fables.html
(Black’s
opening salvo.)
Few people’s efforts at myth-making have been as devastatingly refuted
as Peter Wallison. But fables that are designed to make the banksters look less criminal are always welcome by the banksters. Any honest discussion of Wallison’s claims would begin with three points. First, Wallison’s adult life has been devoted, on behalf of the banksters, to pushing the three “de’s” – deregulation, desupervision, and de
facto decriminalization. He is therefore as culpable as anyone in
the world for the epidemics of accounting control fraud that drove the
financial crisis and the Great Recession.
Second, he was appointed by the
Republican leadership to the Financial Crisis Inquiry Commission (FCIC) to assure that the banksters would have the benefit of their leading apologist. The
chances that he would ascribe any problems to the three “de’s” was always non-existent because he does not have a
scholarly instinct in his body. He is rabidly ideological and a willing tool of
the banksters.
Third,
the Republicans appointed three other members to the FCIC, each of them a highly partisan Republican who was known to
oppose effective financial regulation – yet none of them was willing to join Wallison’s dissent. They were unwilling to do so because Wallison’s dissent was discredited so effectively by the FCIC investigation and report. The data destroyed Wallison’s screed – repeatedly.
But the WSJ editorial pages are no fans of data and huge fans of the banksters and anti-governmental dogma. In the WSJ’s alternate history:
“Peter
Wallison, a
scholar at the American Enterprise Institute, demonstrates in a new
book that the subprime
housing boom was fostered mainly by federal housing politics and policy, not
by the rampant “deregulation” that many have imagined out of whole
cloth.
Note the rhetorical game that Wallison and the WSJ editor play from the beginning – they refer to only one of
the three “de’s” – ignoring desupervision and de factodecriminalization.
The formal rules do not matter if they are not enforced by the banking
regulators and the Department of Justice (DOJ). Wallison knows that desupervision and decriminalization of finance were very close to total –
and that he and those who shared his dogmas such as Alan Greenspan and Ben Bernanke are all responsible for this result. Tom Frank’s Wrecking
Crew captures Bush (II’s) approach to destroying effective regulation, supervision,
enforcement, and prosecutions by appointing anti-regulatory leaders dedicated
to the self-fulfilling prophecy of regulatory failure.
But Wallison (and the WSJ) also ignores the key act of deregulation that lies at the
heart of his thesis (and is fatal to that thesis). The most important act of
deregulation was the removal of our loan underwriting rule that we used to
drive “liar’s” loans out of the S&L industry beginning in 1991. The rule was destroyed by Bill
Clinton and Al Gore’s “Reinventing Government” assault on effective regulation.
The underwriting rule was replaced with a deliberately unenforceable
“guideline.” The elimination of the rule was not the product of housing goals –
it was the product of Clinton and Gore’s “New Democrat” hostility to effective regulation. The
elimination of the rule made it far harder for regulators to ban liar’s loans and take enforcement action against them. (The Fed
had unique authority once HOEPA was passed in 1994 to ban all liar’s loans, but Alan Greenspan and Ben Bernanke’s anti-regulatory dogmas ensured that the Fed refused to ban
such loans even when it knew their fraud incidence was 90 percent. Their
refusal had nothing to do with affordable housing goals and everything to do
with the fact that they were co-celebrants of Wallison’s anti-regulatory dogmas.)
The WSJ op ed actually spends very little time discussing Wallison’s thoroughly and repeatedly discredited thesis that Fannie
and Freddie, because of government housing goals, were the demons that caused
the crisis. The WSJ op ed is really devoted to providing yet another apologia
for the banksters – who are the victims of an overly aggressive DOJ.
Banks have
been shaken down for billions in settlements for selling Fannie and Freddie subprime
loans they demanded. They’ve been criminalized for paperwork shortcuts
in the resulting foreclosure tsunami, though the result was
no material injustice to borrowers.
I will take this very slow because
to be hired to the WSJ editorial staff one must be certifiably Murdoch-delusional.
First, bankers sell mortgage paper. Because of the two great epidemics of
“accounting control fraud” in the loan origination process (“liar’s” loans and appraisal fraud) if those bankers were to sell
their fraudulently originated mortgages to the secondary market they could only
do so by making fraudulent “reps and warranties” to the purchasers such as
Fannie and Freddie (but also many others). That was the third great epidemic of
accounting control fraud. When you make fraudulent reps and warranties to a
purchaser you have engaged in fraud. One remedy for fraud is to pay restitution.
That is not a “shake down.”
Second, the primary “paperwork
shortcut” was that the mortgage servicer prepared pervasively fraudulent affidavits and declarations
(signed under penalty of perjury) that they had taken certain acts to ensure
that foreclosure was appropriate. Those sworn statements were deliberate lies.
That is also called fraud (and perjury) and in addition to being a felony,
represents a host of regulatory violations. The extraordinary fact about all of
these fraud epidemics is that none of the banksters have been prosecuted for the felonies I have described
and one – out of tens
of thousands – has been subjected to a meaningful civil recovery. The WSJ and Wallison ignore or dismiss as trivial the many other frauds
committed by the banksters.
The WSJ op ed is so weak that it seems clear that despite their
formulaic apologia for the banksters’ frauds they know that the jig is up.
(Read
the rest of Black’s article via the link, above.)
Full disclosure, later in his tome
Black also whacks some old Fannie and Freddie actions, but notes that the GSEs maintained their higher quality lending standards far
longer than non-GSE lenders.
Differences Between Fannie and Freddie?
I had a conversation with some
mortgage market veterans this past Friday and “hypothesized”—based on what I
heard about the company CEOs and cultures—if the Government (FHFA, Treasury, WH) told Fannie and Freddie execs to prepare to “merge” (only a theoretical premise, not real, yet), Freddie’s Ed Layton would jump up, salute and then lead his troops down the
slippery slope to “goodbye land,” while Fannie’s Tim Mayopoulos would balk and argue against it.
As one listener said, “So little has changed in 20 years?”
What
Others are Saying
Presidential
Humor
(Email
sent from a former colleague.)
"When they call the roll in the Senate, the Senators do not know whether to answer 'present' or 'not guilty.'"
- Teddy Roosevelt
''In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress.''
- John Adams
"Being president is like running a cemetery: you've got a lot of people under you and nobody's listening."
- Bill Clinton
"Politics is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first."
- Ronald Reagan
"There are few things in life harder to find and more important to keep than love. Well, love and a birth certificate."
- Barack Obama
______________________________________________
New
York Times notes that Bank of America, adding to the litany of bad bank behaviors, just
was fined $33 Million for overcharging veterans’ on the Armed Services members’
bank loans and accounts. Happy Memorial
Day from BofA!!
Brandon Ivey and John Bancroft, writing in Inside
Mortgage Finance, reported major industry developments last week: a
possible mortgage ceiling increase for Fannie and Freddie; solid growth on GSE business volumes from California, which historically
provides a major slug of F&F’s profits; and word that commercial bank lenders increased earnings
in 1Q 2015.
|
Conforming loan limits could go up
for the first time in years as the Federal Housing Finance Agency formally
announced plans to use one of its own home price indexes to calculate
changes.
Given the rising prices, it is now
important that FHFA formally establish the specific methodology it will use
for tracking prices and adjusting the baseline loan limit,” the agency said
in a public notice seeking feedback.
The Housing and Economic Recovery
Act of 2008 prevents the FHFA from raising the baseline conforming loan limit until
home prices recover from the significant declines seen from 2007 through
2011. The baseline loan limit for Fannie Mae and Freddie Mac has been
$417,000 since 2006.
______________________________________________
|
|
Fannie Mae’s and Freddie Mac’s new business volume in the first quarter represented a
huge increase from the feeble start back in early 2014, with all major
markets showing strong gains.
A new Inside The GSEs analysis of GSE business lenders in the first quarter shows that
California posted one of the biggest gains compared to a year ago. The Golden
State produced $44.95 billion of new Fannie/Freddie mortgages, up 69.6
percent from the first quarter of 2014. Over that same period, GSE business grew by 43.3 percent nationally.
|
Commercial banks and thrifts earned
$3.99 billion from their mortgage-banking operations during the first quarter
of 2015, according to a new ranking and analysis by Inside Mortgage Trends.
Mortgage-banking
income was up 12.7 percent from the previous quarter and 19.0 percent ahead of
the pace set in the first three months of 2014. However, early 2015 was no
record-setter, by any means, and profits were well below the levels reached in
the middle of last year.
(Happy birthday to my late brother,
Louis Maloni, who would have turned 78 on June 6. I really miss you,
man!)
Warren and
Shelby
A friend sent me a “twitter report” that some 300,000 people
had looked in on comments by Sen. Elizabeth Warren (D-Mass.) opposing Shelby
(and she and the other committee D’s
voted against it).
I guess that gives me a little bit of hope that the GOP skullduggery gets exposed, but not much.
I had a few arguments with my poker buddies over how good a
politician Shelby is, with me saying, “He’s
real good.”
I think Dick Shelby is too smart a politician to put this
package out there to lose or be embarrassed.
He has the majority votes in the Senate and could attract
enough—to get to the magic sixty to stop a potential filibuster—just by sweetening his bill in
other financial services goodies, some D Senator might want.
Don’t underestimate him!
William Black, an author and consultant on fianncial services
matters, who teaches economics and law at the University of Missouri, delivered
a severe stomping to both the AEI’s
Peter Wallison and the Wall Street Journal editorial board, in a lengthy
article, appearing in “New Economic Perspectives.”
Black’s article is too lengthy to blog print in toto, but the
first few hundred words are worth reading and then finishing with the article
link, provided below.
http://neweconomicperspectives.org/2015/05/the-wsj-and-barrons-apologists-for-the-banksters-peddle-wallisons-fables.html
(Black’s
opening lines.)
Few people’s efforts at myth-making have been as devastatingly refuted
as Peter Wallison. But fables that are designed to make the banksters look less criminal are always welcome by the banksters. Any honest discussion of Wallison’s claims would begin with three points. First, Wallison’s adult life has been devoted, on behalf of the banksters, to pushing the three “de’s” – deregulation, desupervision, and de
facto decriminalization. He is therefore as culpable as anyone in
the world for the epidemics of accounting control fraud that drove the
financial crisis and the Great Recession.
Second, he was appointed by the
Republican leadership to the Financial Crisis Inquiry Commission (FCIC) to assure that the banksters would have the benefit of their leading apologist. The
chances that he would ascribe any problems to the three “de’s” was always non-existent because he does not have a
scholarly instinct in his body. He is rabidly ideological and a willing tool of
the banksters.
Third,
the Republicans appointed three other members to the FCIC, each of them a highly partisan Republican who was known to
oppose effective financial regulation – yet none of them was willing to join Wallison’s dissent. They were unwilling to do so because Wallison’s dissent was discredited so effectively by the FCIC investigation and report. The data destroyed Wallison’s screed – repeatedly.
But the WSJ editorial pages are no fans of data and huge fans of the banksters and anti-governmental dogma. In the WSJ’s alternate history:
“Peter
Wallison, a
scholar at the American Enterprise Institute, demonstrates in a new
book that the subprime
housing boom was fostered mainly by federal housing politics and policy, not
by the rampant “deregulation” that many have imagined out of whole
cloth.
Note the rhetorical game that Wallison and the WSJ editor play from the beginning – they refer to only one of
the three “de’s” – ignoring desupervision and de factodecriminalization.
The formal rules do not matter if they are not enforced by the banking
regulators and the Department of Justice (DOJ). Wallison knows that desupervision and decriminalization of finance were very close to total –
and that he and those who shared his dogmas such as Alan Greenspan and Ben Bernanke are all responsible for this result. Tom Frank’s Wrecking
Crew captures Bush (II’s) approach to destroying effective regulation, supervision,
enforcement, and prosecutions by appointing anti-regulatory leaders dedicated
to the self-fulfilling prophecy of regulatory failure.
But Wallison (and the WSJ) also ignores the key act of deregulation that lies at the
heart of his thesis (and is fatal to that thesis). The most important act of
deregulation was the removal of our loan underwriting rule that we used to
drive “liar’s” loans out of the S&L industry beginning in 1991. The rule was destroyed by Bill
Clinton and Al Gore’s “Reinventing Government” assault on effective regulation.
The underwriting rule was replaced with a deliberately unenforceable
“guideline.” The elimination of the rule was not the product of housing goals –
it was the product of Clinton and Gore’s “New Democrat” hostility to effective regulation. The
elimination of the rule made it far harder for regulators to ban liar’s loans and take enforcement action against them. (The Fed
had unique authority once HOEPA was passed in 1994 to ban all liar’s loans, but Alan Greenspan and Ben Bernanke’s anti-regulatory dogmas ensured that the Fed refused to ban
such loans even when it knew their fraud incidence was 90 percent. Their
refusal had nothing to do with affordable housing goals and everything to do
with the fact that they were co-celebrants of Wallison’s anti-regulatory dogmas.)
The WSJ op ed actually spends very little time discussing Wallison’s thoroughly and repeatedly discredited thesis that Fannie
and Freddie, because of government housing goals, were the demons that caused
the crisis. The WSJ op ed is really devoted to providing yet another apologia
for the banksters – who are the victims of an overly aggressive DOJ.
Banks have
been shaken down for billions in settlements for selling Fannie and Freddie subprime
loans they demanded. They’ve been criminalized for paperwork shortcuts
in the resulting foreclosure tsunami, though the result was
no material injustice to borrowers.
I will take this very slow because
to be hired to the WSJ editorial staff one must be certifiably Murdoch-delusional.
First, bankers sell mortgage paper. Because of the two great epidemics of
“accounting control fraud” in the loan origination process (“liar’s” loans and appraisal fraud) if those bankers were to sell
their fraudulently originated mortgages to the secondary market they could only
do so by making fraudulent “reps and warranties” to the purchasers such as
Fannie and Freddie (but also many others). That was the third great epidemic of
accounting control fraud. When you make fraudulent reps and warranties to a
purchaser you have engaged in fraud. One remedy for fraud is to pay restitution.
That is not a “shake down.”
Second, the primary “paperwork
shortcut” was that the mortgage servicer prepared pervasively fraudulent affidavits and declarations
(signed under penalty of perjury) that they had taken certain acts to ensure
that foreclosure was appropriate. Those sworn statements were deliberate lies.
That is also called fraud (and perjury) and in addition to being a felony,
represents a host of regulatory violations. The extraordinary fact about all of
these fraud epidemics is that none of the banksters have been prosecuted for the felonies I have described
and one – out of tens
of thousands – has been subjected to a meaningful civil recovery. The WSJ and Wallison ignore or dismiss as trivial the many other frauds
committed by the banksters.
The WSJ op ed is so weak that it seems clear that despite their
formulaic apologia for the banksters’ frauds they know that the jig is up.
Full disclosure, later in his tome
Black also whacks some old Fannie and Freddie actions, but notes that the GSEs maintained their higher quality lending standards far
longer than non-GSE lenders.
Differences Between Fannie and Freddie?
I had a conversation with some
mortgage market veterans this past Friday and “hypothesized”—based on what I
heard about the company CEOs and cultures—if the Government (FHFA, Treasury, WH) told Fannie and Freddie execs to prepare to “merge” (only a theoretical premise, not real, yet), Freddie’s Ed Layton would jump up, salute and then lead his troops down the
slippery slope to “goodbye land,” while Fannie’s Tim Mayopoulos would balk and argue against it.
As one listener said, “So little has changed in 20 years?”
What
Others are Saying
Presidential
Humor
(Email
from a former colleague.)
"When they call the roll in the Senate, the Senators do not know whether to answer 'present' or 'not guilty.'"
- Teddy Roosevelt
*
''In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress.''
- John Adams
*
"Being president is like running a cemetery: you've got a lot of people under you and nobody's listening."
- Bill Clinton
"Politics is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first."
- Ronald Reagan
"There are few things in life harder to find and more important to keep than love. Well, love and a birth certificate."
- Barack Obama
______________________________________________
New
York Times notes that Bank of America, adding to the litany of bad bank behaviors, just
was fined $33 Million for overcharging veterans’ on the Armed Services members’
bank loans and accounts. Happy Memorial
Day from BofA!!
Brandon Ivey and John Bancroft, writing in Inside
Mortgage Finance, reported major industry developments last week: a
possible mortgage ceiling increase for Fannie and Freddie; solid growth on GSE business volumes from California, which historically
provides a major slug of F&F’s profits; and word that commercial bank lenders increased earnings
in 1Q 2015.
|
Conforming loan limits could go up
for the first time in years as the Federal Housing Finance Agency formally
announced plans to use one of its own home price indexes to calculate
changes.
Given the rising prices, it is now
important that FHFA formally establish the specific methodology it will use
for tracking prices and adjusting the baseline loan limit,” the agency said
in a public notice seeking feedback.
The Housing and Economic Recovery
Act of 2008 prevents the FHFA from raising the baseline conforming loan limit until
home prices recover from the significant declines seen from 2007 through
2011. The baseline loan limit for Fannie Mae and Freddie Mac has been
$417,000 since 2006.
|
|
Fannie Mae’s and Freddie Mac’s new business volume in the first quarter represented a
huge increase from the feeble start back in early 2014, with all major
markets showing strong gains.
A new Inside The GSEs analysis of GSE business lenders in the first quarter shows that
California posted one of the biggest gains compared to a year ago. The Golden
State produced $44.95 billion of new Fannie/Freddie mortgages, up 69.6
percent from the first quarter of 2014. Over that same period, GSE business grew by 43.3 percent nationally.
|
Commercial banks and thrifts earned
$3.99 billion from their mortgage-banking operations during the first quarter
of 2015, according to a new ranking and analysis by Inside Mortgage Trends.
Mortgage-banking
income was up 12.7 percent from the previous quarter and 19.0 percent ahead of
the pace set in the first three months of 2014. However, early 2015 was no
record-setter, by any means, and profits were well below the levels reached in
the middle of last year.
(Happy birthday to my late brother,
Lou Maloni, who would have turned 78 on June 6. I really miss you,
man!)
What's the first question the general public now asks when they hear of a bank robbery conviction ?
ReplyDelete"So how much did the bank get fined?"
I discussed my petition idea with several people, including those who know nothing about bank policy or the Congress. Most of the latter thought the fines were the answer and therefore, "things were being taken care of." A few others said nice things about Senator Warren, but no outrage or anger.
ReplyDeleteHow many times must one circle the proverbial block before they realize that dems and reps are two cheeks on the same arse? Both stink from a lack of wiping clean their side of the isle, loaded with p.o.s., seem to promote the dingleberrries to leadership positions and as a hole, are in desperate need of an enema!
DeleteYeh, yeh, but--the one issue that most interests me these days, the GSEs--over time showed the GOP almost always on the anti-side and the Democrats, for the most part on the side of F&F.
ReplyDeleteBTW, I thought John Adams' remark in "Presidential Humor" was the funniest and telling; that was offered more than 200 years ago.
Great blog thanks. The GSE petitions need feet on the street to gain any traction IMO. The public would need a canned version of the major issues and how it effects them.
ReplyDeleteI liked John Adams remark the best as well. Funny that Congress has had a bad M.O. for so long.
Truth, JW--if you look at the Greek and Roman Senate debates, you will see the same types of language, behaviors, positioning, posturing, and blame casting.
ReplyDeleteOpen a Congressional Record from 50 or 75 years ago, and read any debate on a major--or even minor legislation--same-o, same-o.
It seems to go with those who are "representing" other citizens?