Category: White Collar Crime

The Rules!

On By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, Economic measurement, ethics, Government Failure, Philosophy of Business, White Collar Crime

Right now, all over America, there is a single perception. We, the people, live by one set of rules. The financial institutions of this nation live by another.

The one we live by requires that we obey the law and should we fail, there are many penalties which include fines, jail time and public disgrace.

The great investment firms live by laws that are flexible, that bend with circumstance and desire. When they commit crimes, the offenses are considered civil matters. When they are found liable in civil court, the amount of fines compared to their profits are laughably small. When they violate regulations, the violations are either ignored, minimized or papered over. And when finally they commit such acts as endanger the welfare of the nation and it people, even then the law is not applied to them and they receive money and not punishment.

And never, under any circumstances is the flow of their profits and in particular, their bonuses, to endangered at any time under any circumstances.

The nation is bleeding.

It bleeds every day.

It’s bleeding credibility.

It’s bleeding honor, morality and ethics.

To many in this society, these are all jokes, the subject of humor.

To the great financial houses, the flag means the convenient locale with the least regulations. They live here and obey the rules here only when it is convenient. They are Americans of convenience.

We have spawned a series of institutions in this country that exist to its financial and ethical detriment.

They do not build value. They take it.

They do not limit risk. They increase it.

Can this nation long survive with two standards?

I do not believe this nation can long survive, half held to rules and half not.

It will either become all of one or all of the other.

Which one?

James Pilant

I’m Not The Only One Who Believes The Banks Don’t Have The Documents.

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, Philosophy of Business, White Collar Crime3 Comments

William K. Black and L. Randall Wray call for putting the Bank of America into receivership!

How about that! Seize the bank and the government go through their books to find out what’s really going on. That’ll stand some CEO’s hair on end. It might get their attention. I’d like to see that.

I’ve talked for the last several days about my suspicion now hardening into belief that the banks do not have proof of ownership tens of thousands of foreclosures. I am not the only one who believes that.

Read –

Nothing short of removing all senior officers who directed, committed, or acquiesced in fraud can be effective against control fraud. We repeat: Foreclosure fraud is the necessary outcome of the epidemic of mortgage fraud that began early this decade. The banks that are foreclosing on fraudulently originated mortgages frequently cannot produce legitimate documents and have committed “fraud in the inducement.” Now, only fraud will let them take the homes. Many of the required documents do not exist, and those that do exist would provide proof of the fraud that was involved in loan origination, securitization, and marketing. This in turn would allow investors to force the banks to buy-back the fraudulent securities. In other words, to keep the investors at bay the foreclosing banks must manufacture fake documents. If the original documents do not exist the securities might be ruled no good. If the original docs do exist they will demonstrate that proper underwriting was not done — so the securities might be no good. Foreclosure fraud is the only thing standing between the banks and Armageddon.

I can’t say it better.

James Pilant

Dollar$ for Doc$ (via Pharmaregulations – Also Known As – Your Daily Dose: The Ethics Behind Pharmaceutical Marketing)

On By southwerkIn business ethics, Capitalism, ethics, White Collar Crime

My good friends at pharmaregulations have one hot off the press written with their usual style. They are kinda’ knocking me out of this area of reporting, their stuff is so good. And that is just fine. I have plenty of ground to cover and they cover this brilliantly. It’s not a long post. Give it a read. It’s good stuff.

James Pilant

Dollar$ for Doc$ The pharma blogosphere is exploding today with breaking news about a marketing practice by drug companies: your doctor might be on their payroll. Propublica, a company dedicated to "journalism in the public interest", compiled a report of all doctors in all states that received kickbacks from pharmaceutical companies to prescribe their name-brand (more expensive) drug even if there is a generic form available. The data is only on seven companies … Read More

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Department Of Housing And Urban Development Leaps Into Action?!

On By southwerkIn business ethics, ethics, Government Failure, White Collar Crime5 Comments

U.S. Housing and Urban Development Secretary Shaun Donovan had this to say on behalf of the Obama Administration.

Get a load of this! –

“Where any homeowner has been defrauded or denied the basic protections or rights they have under law, we will take actions to make sure the banks make them whole, and their rights will be protected and defended,” Donovan said at a Washington press briefing. “First and foremost, we are committed to accountability, so that everyone in the mortgage process — banks, mortgage servicers and other institutions — is following the law. If they have not followed the law, it’s our responsibility to make sure they’re held accountable.”

Wow! So, let me get this straight. The foreclosure industry and many banks have been foreclosing on homes with false affidavits and, very often, little or no documentation. They have been doing this for more than two years.

You have never caught any of them doing anything wrong for that entire two year period.

Tell me, at what point in time, did you discover you were committed to accountability? ‘Must have been sudden!

After you have ignored countless stories in the press over the last two years and finally, days ago, after all fifty state Attorney Generals have announced action, you organize a posse, mount up and ride for justice?

Well, problem solved!! All we have to do is wait for you to bring ’em in!

I’m so pleased. I’m so impressed. I’m touched by your devotion to justice. I’m awed by your dogged pursuit of wrong doers.

Right! And here’s what I really think.

You couldn’t find your butt with a 50,000 watt searchlight.

James Pilant

Why Should We Have A Foreclosure Moratorium?

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, White Collar Crime

Ezra Klein from the Washington Post –

Ezra Klein: (Klein has just asked why should we do a moratorium, this is his follow up question.) But won’t that just freeze the markets and throw everything into more chaos? And as for the homeowners, most of them will end up being foreclosed on anyway. We’ll have delayed the inevitable, adding uncertainty to economic pain.

John Taylor: (John Taylor is president and chief executive of the National Community Reinvestment Coalition.) Those are people who don’t understand what’s happening in the crisis. The point of a moratorium is to give the counselors and the attorneys time to negotiate a fairer, more responsible mortgage product. Mortgages where properties have been abandoned and the banks are repossessing them should go forward. But in other cases, where people have just lost jobs, we can be more patient. Citibank has given those people six months to get back on their feet. That’s what we need, not greasing the skids of this process. People need to understand, every time there’s a foreclosure, if you’re near that house, your property value goes down.

Taylor goes on to discuss the time a moratorium should last. I’ve been calling for three months. I’m a piker. Taylor calls for 6 to 8 months.

But he makes sense, a moratorium would encourage banks to renegotiate the loans, not just foreclose. We could do with a little reason, a little intelligence in this process. As I have pointed out before, giving people BMW sport utility vehicles for signing record numbers of foreclosure documents without looking at them is not just illegal, it’s crazy. It doesn’t make any sense to game the system like that. Rewarding people for good performance is not a bad idea. Rewarding people for lunacy, rewarding people for things that get your sanity questioned is not good management practice.

We could do mortgage foreclosures like people, not like process. We can live as decent human beings. We have choices. We can try to keep people in their homes. We can try to make the best of a bad situation. We don’t have to live this way.

James Pilant

Jail Time For False Affidavits? Is It Possible For A Banker To Go To Jail?

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, Philosophy of Business, White Collar Crime

Alain Sherter writing for BNET covers many of the angles in the foreclosure mess. In fact, his article is a good general guide to the controversy and the continuing crisis. Nevertheless, I am focusing on one part of that article.

The Following –

In looking into cases of improper foreclosure, federal officials are also raising the heat by exploring whether financial institutions broke the law in filing fraudulent paperwork. Such inquiries are usually left to the states, which usually have jurisdiction in real estate disputes. Since government housing agencies buy and guarantee bank mortgages, however, a criminal investigation could have teeth. And unlike private investors, obviously, the government has enormous power to compel banks to provide evidence of faulty documentation involved in originating and securitizing loans:

“In more than 25 years dealing with major financial crisis issues, I have never seen this many agencies focused on a single issue,” said Andrew Sandler, a lawyer who works on government investigations. “We are beginning to see signs of extensive governmental investigation that may also have criminal law implications.”

So, are we about to see some actual criminal justice? It would be a strange thing indeed to see justice done to those so high in their own estimation.

James Pilant

Toxic Mortgages – Will The Banks Have To Buy Them Back?

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, White Collar Crime2 Comments

If you read my last post, you may recall my emphasis on the word, putback. Strangely enough, it took about five minutes after I put that post up that the phrase once again became important.

Read this (from a CBS Moneywatch posting called, “The Foreclosure Mess: The Start of Another Bank Bailout?” –

The foreclosure mess suddenly turned messier yesterday when a group of heavyweight investors, including the Federal Reserve Bank of New York, demanded that Bank of America buy back toxic mortgages that a subsidiary had sold them during the housing bubble. BlackRock, the world’s largest investment company, and Pimco, the world’s largest bond manager, joined the New York Fed in arguing that shoddy record keeping and other missteps by Bank of America subsidiary Countrywide Financial amount to a breach of their contract. Such a breach would allow the investors to sell the mortgages back to the bank at full price. The investors’ claims, which became public yesterday, probably marks the opening shot in a long legal battle that could cost B of A billions and possibly push it into insolvency.

Wow, the unfortunate entities (like pension funds) who bought these toxic assets have come back for a fight. They are saying that the numerous, continuous and often illegal acts (false affidavits presented to the court system – not a matter of opinion or just sloppy paperwork – crimes), have breached their contract. So, in the vernacular, the want their money back and they want it now! (That’s a putback by the way.)

Okay, let’s read a little more from the article –

That adds a new dimension to the foreclosure mess, which the banks had been hoping to put behind them. Banks and others had argued that maybe some i’s weren’t dotted and a few T’s might have misplaced crosses on mortgage documents, but those were just technicalities. The bottom line is that people didn’t pay their mortgages and foreclosures should be allowed to proceed. The Wall Street Journal editorial page recently declared: “We’re not aware of a single case so far of a substantive error.” But now some of the world’s savviest investors are joining defaulting homeowners in claiming that too many T’s are missing crosses. Unlike defaulting homeowners, most of whom will eventually lose their homes to foreclosure, the investors may succeed in winning concessions from the banks. And if the courts agree that Bank of America must make the investors whole, it could be more than the bank’s fragile finances could bear.

So, if the banks through their very own wretched incompetence lose ten of billions of dollars, they may turn to the taxpayers for a little more money!

Have you noticed a common thread that runs through every single story about these banking adventures? No one ever seems to go to jail. No one every seems to really get in any trouble at all, except of one group, a little bitty one.

The taxpayers always seem to be riding to the rescue of their fellow citizens, whoops, I mean the banks, whether they want to or not.

Tell me, does that get old after a while?

James Pilant

White House Refuses To Act! Administration Will Not Call For Foreclosure Freeze!

On By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, ethics, Government Failure, Philosophy of Business, White Collar Crime2 Comments

What a shock! The White House siding with the banks! Who would have thought it? Well, me. I was shocked the President pocket vetoed the legislation that would have retroactively made the banks false affidavits a non problem, but I needn’t have worried this meant a change of policy.

The banks will be protected. Homeowners are not that big a deal, but banks, no matter what they’re doing (unethical, illegal, cruel, vicious, incompetent- those things), will be protected.

Well, the President figured he’d stand firm, conduct a cursory investigation, which would be kept well in hand, and it would all go away.

Wrong, the crisis keeps rolling and keeps getting bigger.

Now, listen up, this is not the fault of Rahm Emanuel, Larry Summers, the President’s Council of Economic Advisers, or the Fed. The President of the United States is making these decisions. There is only one guy in charge at the White House and unless they’re holding his family hostage, he is the architect of his own decisions.

The President once said, “My administration is the only thing between you and the pitchforks.” How about, “and the law, and justice and accountability?”

I think those ought to be in there too.

Well, the crisis continues. This is Jill Schlesinger from CBS’ Moneywatch –

Banks are against the moratorium because it could call into question larger documentation issues, which could in turn put the nation’s biggest financial institutions on the hook for breaches of representations and warranties made to buyers of mortgage-backed securities. If there were a breach, the buyers of the loans in question could “put back” the loans to the banks, forcing the banks to repurchase them for face value or to make the owner of the mortgage whole for the losses incurred. Some analysts have estimated the potential cost of putbacks to banks to be over $100 billion.

Let’s talk about this “putback” thing a little bit. Soon, you may hear about little else in the news!

You see the banks unloaded all these nasty securities packages on pensions funds, etc., selling them as if they were good values without disclosing their inherent flaws because the purchasers were “knowledgeable investors,” a legal status that is essentially a license for investment banks to lie to them. If the banks misrepresented these loans, the pension funds, etc. can demand their money back. What terrible thing could the bank have lied about that would get them in trouble? Well, they might have told the buyer that they owned the mortgages when they didn’t have the actual documents of ownership. Whoops! One hundred billion dollars! That a lot of money.

Remember that phrase, “putback.”

James Pilant

Gael O’Brien Reviews The Documentary – “Inside Job”

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure, Philosophy of Business, White Collar Crime5 Comments

From the article –

While of course we know the outcome of the unfolding events Ferguson describes, his interviews with many of the players in the crisis provide additional insight into the larger question of how could so many very bright people be involved in a failure so huge? The film shows the consequences when thought capital is wrapped around the dogged pursuit of an ideology, in this case deregulation, so that conflicting data or opposing viewpoints are not allowed to interfere.

The band of men from Ivy League economics departments wielded a lot of power in the 30-year push for deregulation. They served as consultants to the industry and were selected for significant regulatory or White House advisor positions. Ferguson raises questions about their objectivity as scholars, as well as whether their integrity was compromised by conflicts of interest and accepting fees from Wall Street, or to testify before Congress, or as expert witnesses.

I’ve already written a recommendation style review of the documentary and this one is very positive as well.

You need to read it to get the full flavor of O’Brien’s prose.

James Pilant

RECORD FINES = WHAT PATHETIC NONSENSE!!

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, White Collar Crime

From the BBC –

Angelo Mozilo will pay the Securities and Exchange Commission $22.5m (£14.1m) and repay $45m of profits.

He is the highest profile executive to face charges relating to the US sub-prime mortgage crisis in 2007.

The SEC alleged he, with two colleagues, had failed to disclose risks that Countrywide was taking.

The civil charges related to claims he had misled the market by falsely assuring investors that Countrywide was a prime quality mortgage lender that had avoided the excesses of its competitors.

From 2001-2006, his compensation was 470 million dollars.

This is what passes for justice.

This is supposed to send a message.

This is supposed to be a nation under laws.

This is rubbish.

James Pilant