Burglary and Banking


Burglary and Banking

What if we punished burglars the way we punish banks for crimes?

Let us assume the burglar steals one hundred high definition televisions from one hundred different homes and sells them for one hundred dollars each. He now has ten thousand dollars. If caught and convicted of all these offenses, his sentence could run into hundreds of years and he would be forced to restore any stolen property and profits derived from the sale of such property.

Now, let us use banking penalties – The same burglar steals the same number of sets and makes the same profit, 10,000 dollars. We catch him and after some negotiation he is willing to accept a fine but will not admit committing a crime. The fine is usually around ten percent of his ill-gotten gain, thus he owes the government, 1,000 dollars.

Obviously, he will not commit this same offense because of the stigma that now hangs over him from being caught committing a crime, and since his reputation has been damaged, no further punishment is necessary as a deterrent. And since, he is an upstanding and valued member of the community because many can buy inexpensive televisions due to his financial innovations, and a number of people who sell his “finds” rely on him for their jobs – for this man is indeed a job creator.

Now a cynic might point out that the burglar can replace all his losses from the fine by stealing just ten more televisions. And that if he is only caught ten percent of the time and has to pay ten percent of his gains each time, his penalty would only come to one percent of his criminal profits.

That is the situation the banks are in. To reiterate, if you pay a ten percent fine on your thefts and you are only caught ten percent of the time, you are out 1% of your profits.

Now, you are reasonable human being, if you were the burglar in this example and subject to these kinds of penalties would the pressure on you reform you or inspire you to even greater crimes?

James Pilant

On The Same Subject.

http://ronmamita.wordpress.com/2014/04/21/banking-fraud-under-attack/

Banks Fail Basic Business Ethics


wn15-27Banks Fail Basic Business Ethics

Freddie Mac Unaware Of Homeowner Complaints, Inspector General Concludes

For more than five years, many homeowners who complained about mortgage industry foreclosure abuses have wondered whether anyone with a financial stake in keeping them in their home was paying attention. On Thursday, with the release of a new report from a federal watchdog, they got their answer: No.

The report, by the inspector general of the Federal Housing Finance Agency, says banks and other companies that manage more than 10 million home loans for Freddie Mac “largely failed” to alert the mortgage giant to the most serious category of homeowner complaints, despite a requirement they do so. These “escalated complaints” often include the most serious allegations of misconduct, including improper fees, misapplied mortgage payments and a frustrating cycle of lost paperwork and unreturned calls. In some instances, the mismanagement has led to a wrongful foreclosure.

“The results are shocking on a number of different levels,” said Steve Linick, the FHFA inspector general, in an interview with The Huffington Post. “It is surprising that servicers were not reporting in such large numbers, that Freddie was not on top of this, and that [the FHFA] did not catch it in its exam.”

Four of the largest bank servicers — Bank of America, Wells Fargo, Citigroup and Provident — reported no escalated cases to Freddie Mac, despite handling more than 20,000 over a 14-month period, according to the report. Freddie Mac examiners did not notice that the mortgage companies were failing to disclose the complaints, nor did the FHFA, which relied on “incomplete” Fannie Mae examinations, the report concludes. The FHFA oversees the bailed out lenders Freddie Mac and Fannie Mae.

Freddie Mac Unaware Of Homeowner Complaints, Inspector General Concludes

 

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Banks Poor Record Keeping Strikes Again


 

Debt collectors assisted by poor bank record keeping.
Debt collectors assisted by poor bank record keeping.

Banks Poor Record Keeping Strikes Again

Big Banks Face Investigation Into Whether They Helped Debt Collectors Pursue Faulty Judgments

The largest U.S. banks face a multi-state investigation into whether they helped debt collectors pursue faulty judgments against credit card customers, according to people familiar with the matter.
At issue is whether weak record-keeping by banks or a failure to pass accurate information to collection agencies harmed consumers.
The allegations against the banks echo those central to last year’s $25 billion federal-state mortgage settlement to resolve charges that the banks “robo-signed” documents and pursued foreclosures with faulty information.
This latest probe targets the same banks, including Bank of America, JPMorgan Chase, Citigroup and Wells Fargo, said the sources who spoke on condition of anonymity because the investigations are continuing.
As with the mortgage cases, the investigation focuses on the banks’ poor paperwork and their weak tracking of the debts.

Big Banks Face Investigation Into Whether They Helped Debt Collectors Pursue Faulty Judgments

Poor record keeping or phrasing it differently, a reckless indifference to the property rights of mortgage holders, is in the news again.  The banks originally used their record keeping to facilitate seizing properties they lacked proper title to. But that wasn’t the only damage being done. It would appear they sold to debt collectors, debts owed to them by the mortgage holders dependent on the very same records they misused for years. You would think they would have noticed there would be a problem but no, people don’t like to think about their mistakes and crimes. So, we have former bank clients who owe no money being hounded by debt collectors.

Has anything been done to discourage these practices? It seems the profit never ends and no one is penalized? Does that mean that the banks can preserve for use over the next decades? Are these going to become standard bank practices?

These practices of poor record keeping and lying affidavits are illegal but with scarcely any penalty imposed they are undeniably profitable.

Aren’t these what Milton Friedman referred to as the “rules of the game,” and if you play by those, isn’t everything okay, you know – free choice, freedom to choose?

I suppose the feds will follow the usual practice of fining the banks a pittance and then allowing them to choose who should receive monetary relief if anyone at all.

This may not discourage the banks from continuing these kinds of acts.

James Pilant

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Banks Manage their own Penalty


Banks Manage their own Penalty

Mortgage Settlement Report Finds Banks Reluctant To Reduce Principal, Despite Promises

The largest mortgage settlement in U.S. history was pitched by its creators as a deal that would offer quick aid to 1 million people in danger of losing their homes to foreclosure. But according to a report released Thursday by the court-appointed monitor of the settlement, in the first nine months after the $25 billion deal was struck, fewer than 50,000 people received the most coveted form of relief: reduction of principal owed on a first mortgage.

Meanwhile, more than three times as many borrowers — 169,000 — agreed to a short sale, which requires they leave the property, according to the report.

Banks still have time to meet their obligations under the settlement, which requires that 30 percent of total relief come in the form of first mortgage principal reduction. But housing advocates say the limited progress so far — just 14 percent of aid has gone to write down loan balances — suggests that banks are avoiding, or at least delaying, their obligation to provide meaningful relief as they promised under the deal.

Mortgage Settlement Report Finds Banks Reluctant To Reduce Principal, Despite Promises

Banking Honor?
Banking Honor?

What did the federal government think would happen when their vaunted, over-hyped 25 billion dollar settlement wound up in the hands of the banks themselves? A child could have made an accurate prediction. You reward criminality by avoiding any real penalties. You chock it up as an enormous victory for the government while the banks and people like me hold you in contempt for your incompetence and servile stance to corporate crime. The banks have to pay back some money to the people they stole from. Great. Except that they decide who gets the money and they have decided that most of the money will go to short sales. Isn’t that special. They’re maximizing their profit. Who would’ve thought?

James Pilant

 

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The Banks Evade Responsibility Again


The Banks Evade Responsibility Again

Banks thrive, while homeowners still suffer | The Great Debate

A year ago the federal government and 49 states completed a $25 billion agreement with the nation’s largest mortgage servicers to settle claims of “robo-signing” and unlawful foreclosure practices. President Barack Obama announced the creation of the federal-state mortgage securities working group in his 2012 State of the Union address. The nation seemed on the verge of transforming the way banks treat struggling homeowners ‑ particularly those with “underwater” mortgages, in which a homeowner owes more than the house is worth.

These promises, however, have yet to be fulfilled. The latest interim report on the national mortgage settlement is due out this week, and banks will likely again declare that it offers proof that they are fulfilling their obligations. But the communities hit hardest by the foreclosure crisis have yet to see any meaningful relief.

Time is running out to ensure that these communities receive their fair share under the settlement. But it is not too late to provide meaningful assistance. The settlement monitors need to demand greater transparency from banks, and they need to see that banks comply with the fair-lending requirements set out in the agreement. They also need to aggressively police the servicing reforms to ensure that all homeowners get a fair opportunity to save their homes.

Banks thrive, while homeowners still suffer | The Great Debate

And from further down in the article:

Unfortunately, there is little transparency about how the banks are using this money. They have not provided any loan-level data to show which borrowers are receiving assistance.

Moreover, mortgage servicers have complete discretion over who receives help. Advocates fear the banks have been cherry-picking expensive loans that are deeply underwater to meet their settlement obligations quickly. This provides an important service for the borrowers in that category but little systematic relief for low- and moderate-income communities suffering the most from the foreclosure crisis.

Simply immune to prosecution?
Simply immune to prosecution?

The mortgage holders committed fraud for years making billions of dollars taking homes they had little or no claim to. They used the HAMP program as a weapon against homeowners, telling them to skip three payments so as to be able to qualify, then rejecting their applications or not bothering to even process them (not that we’ll ever know in most cases, the HAMP program kept no records for the first two years) and then quickly foreclosing on their homes. I’ve had students in my classes who were victims of that scam.

Instead of holding the perpetrators of these crimes accountable they were “sort of” fined 25 billion dollars through a program they administer and report on without effective oversight. Let me repeat that – they, the banks, administer the program to give back some of the money and homes they stole. Oh, forgive me, they are not giving the homes back just some money should they feel in some way that they want to because if they don’t want to, they don’t have to.

That is what passes for justice in the current administration and the 49 states that the bankers negotiated this sweetheart deal with. Crime pays in the United States if you are a banker dealing mortgages.

They stole billions of dollars worth of homes. They in an epic display of arrogance created a parallel system of recording deeds without any legal justification purely to expedite trading of mortgages and to evade filing fees. They lied to judges all over the United States in countless jurisdictions filing tens of thousands of false affidavits saying that their paperwork, their proof of ownership was in order.

These are crimes, not mistakes, crimes.

If I stole through fraud the least home in the land, I would and should do prison time. No one has been sentenced for these crimes. Without prison time, fines, that are a fraction of the money made, are the only deterrent. Is that enough? Does that make sense?

Two systems of justice – one for the bankers and one for regular citizens, the “common” folk, the ones without political friends; the ones that don’t have the right memberships, the right bank accounts, the right lives lived in the adoration of business television and magazines.

We discussed in my class on business law and business ethics what it takes to build a good society. One of the thoughts was to reward virtue and penalize wrong doing. What kind of society does this build?

I think you know the answer.

James Pilant

From around the web –

From the web site, Diane’s Blog:

Kamala Harris is right: we need a Homeowners Bill of Rights, and the banks, like it or not and they don’t,  need good, strong regulations to control them. These two items are bare minimums.  As for giving the money to individual homeowners, if it does happen, the amounts will be small because the numbers involved are so large. Better to allocate some money to homeowners’ advocacy and education groups.

From the web site, On the Frontlines of Americans with Debt:

The  five mortgage companies who are part of the settlement are Bank of America, Wells Fargo, Chase, GMAC/Ally Financial, and Citibank.
While HUD estimates that 2 million homeowners could see their mortgage balances reduced, it will be up to the five banks to determine which homeowners will be included in the program.
In addition, payments of between $1500 and $2000 will be paid to people who lost a home to foreclosure between 2008 and 2011, so long as certain criteria are met. The factsheet does not explain the criteria necessary for those people to qualify.

And finally from the web site, Defend My Florida Home:

A major impediment to mortgage modifications is the bank practice of “dual tracking” mortgages.  When a mortgage is dual tracked the bank pursues foreclosure while at the same time allowing the home owner to pursue a modification.  The problem with this is that in spite of an eminent, or completed modification the bank will still sell a home at sale leaving the owner homeless.

 

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Mortgage Industry as the Wolf?


Mortgage Companies as Wolves
Mortgage Companies as Wolves
Mortgage Industry as the Wolf?

Foreclosure Review In New Settlement Leaves Homeowners In Banks’ Hands

For more than a year, housing advocates and their allies worried that a review of foreclosed loans managed by banking regulators was vulnerable to mortgage industry interference.

On Monday, the Office of the Comptroller of the Currency and the Federal Reserve Board — the two regulatory bodies that had taken the lead in making the nation’s largest banks accountable for rampant foreclosure fraud — announced that homeowners no longer need worry about the independence of the reviews. The regulators, essentially admitting that the reviews were too difficult to conduct, and that assigning appropriate compensation to those most harmed by the banks was no longer a priority, said the mortgage companies themselves will determine how to distribute $3.3 billion to more than 4 million homeowners forced into foreclosure in 2009 or 2010.

Housing advocates, while acknowledging that the foreclosure reviews were flawed, said they don’t understand how turning the process over to mortgage companies improves a system already insufficiently independent.

“The regulators have decided to replace the fox in the henhouse with the wolf,” said John Taylor, president of the National Community Reinvestment Coalition, a Washington-based housing nonprofit. “It is just incomprehensible to me that they could not find a third party that has the wherewithal and independence to fairly determine what the damage is to homeowners.”

Foreclosure Review In New Settlement Leaves Homeowners In Banks’ Hands

Is this good business ethics? Well, let’s look at it from the mortgage companies’ point of view. They made an enormous profit by misleading courts and mortgage holders as to who actually owned the property. In many cases, they told clients that they should skip payments, usually three payments, explaining to them that they would then qualify for government programs like HAMP. Once the home owner had skipped the payments, the bank immediately foreclosed. It terms of money, it was an incredible success.

Let’s analyze based on the Social Responsibility. Social responsibility rests on four pillars: economic, legal, philanthropic, ethical, and philanthropic.

Did the mortgage companies profit? Yes, but it depends on which stakeholders you look at. The shareholders did well. The employees did very well. The customers, at least as far as mortgage holders, were crushed. They are unlikely to ever be customers again. It is very difficult for families to buy a home in the first place. A second bite after foreclosure is not likely. The community was hurt badly by the thousands of empty homes, the collapse of the housing industry and the larger economic bust.

But let us have a special look at our last major shareholder, the regulatory agencies. They came, they saw, they said it was too difficult and gave it all back to the banks after extracting a promise that the banks will be good and give back 3.3 billion of the money they stole in the first place. It would appear the regulators are doing okay. They have shed their responsibilities to the public, which is always much easier than doing your job.

Was it legal? No. The banks violated the law thousands of times, perhaps hundreds of thousands. They lied routinely in official documents requiring affidavits and, for all intents and purposes, were in the business of stealing homes. They have, however, walked away unscathed.

Was it ethical? You have lying on a cosmic scale and theft of the property in the many billions of dollars. I don’t feel further analysis is required here.

And finally, was it philanthropic? Did they give back to the community? This is a pure case of negative philanthropy. The banks often had no concept of what to with the homes they took. They often didn’t care for them. Sometimes, they found it cheaper just to bulldoze them. They took value out of the community and replaced it with negative costs.

This is another sorry episode, which I will wonder if it is wise to mention to my business students? Should I tell them that stealing people’s homes will make you enormously rich while you with virtually no penalties? I am honest. I will. But I would rather not have negative business ethics taught so well by the mortgage companies. It makes what I do look foolish.

James Pilant

From the web site, The Support Center:

Major banks have once again agreed to a settlement, this time worth $8.5 billion, to compensate homeowners whose homes were fraudulently foreclosed upon in 2009 and 2010 through practices such as “robo-signing.” JP Morgan Chase, Bank of America, and and Wells Fargo will pay $3.3 billion to homeowners, and the remaining $5.3 billion will reduce mortgage bills and forgive principals on homes that were sold for less than what the owners owed on their mortgages. 3.8 million homeowners will be eligible to receive compensation ranging from a few hundred dollars to a maximum of $125,000.

In another settlement, Bank of America has agreed to pay the federal housing finance agency, Fannie Mae, $11 billion for selling the agency bad mortgages that defaulted, causing Fannie Mae to assume all the losses. $3.6 billion will be used to compensate for the bad mortgages, and $6.75 billion will be used to buy back mortgages.

Both of these agreements are part of a process to mitigate the impacts of the housing crisis and to hold the banks accountable for their role in both creating the housing bubble and in using questionable, if not fraudulent, methods in servicing their loans and processing foreclosures. Having faced significant losses, Bank of America continues to move out of the mortgage market, and in the deal with Fannie Mae, it agreed to sell the servicing and collection rights for 2 million loans, totaling $306 billion. Some economists and analysts are concerned that as the major banks shift away from mortgage lending, the industry is being consolidated into the hands of a few banks. However, though the housing market is recovering slowly, banks, such as Bank of America, might not be in a position to compete, given the losses they’ve already incurred and the problems they’ve had in servicing loans.

From the web site, Buzz Sourse:

Housing advocates, while acknowledging that the foreclosure reviews were flawed, said they don’t understand how turning the process over to mortgage companies improves a system already insufficiently independent.

“The regulators have decided to replace the fox in the henhouse with the wolf,” said John Taylor, president of the National Community Reinvestment Coalition, a Washington-based housing nonprofit. “It is just incomprehensible to me that they could not find a third party that has the wherewithal and independence to fairly determine what the damage is to homeowners.”

Regulators said the review process, which sought to determine if specific loans were unfairly foreclosed upon, was too costly and time-consuming. Under the new deal, 10 mortgage companies, including Bank of America, Wells Fargo and JPMorgan Chase, will pay $8.5 billion. Of that, $3.3 billion is earmarked for direct payments to “eligible borrowers” whose foreclosures were handled improperly. The remaining $5.2 billion will help struggling borrowers with programs such as loan modifications.

And finally, from the web site, 4Closure Fraud (reprinted from ProPublica):

The Independent Foreclosure Review was supposed to be a full and fair investigation of the big banks’ foreclosure abuses, and it was trumpeted as the government’s largest effort to compensate victimized homeowners. Federal regulators, who designed the review, forced banks to spend billions to carry it out. Millions of homeowners were eligible and hundreds of thousands submitted claims. But Monday morning, the very regulators who launched the program 18 months ago announced that it had all been a massive mistake and shut it down.

Instead, 10 banks have agreed to pay a total of $3.3 billion in cash to the 3.8 million borrowers who had been eligible for the review. That’s an average of around $870 per borrower. But typical of a process that’s been characterized by confusion, delays and secrecy, regulators said the details of how the money will be doled out were not yet available.

The headline number for the settlement is $8.5 billion, but that includes $5.2 billion in “credits” the banks will receive for actions they take to avoid foreclosures, such as providing loan modifications. That’s very similar to the separate $25 billion settlement reached last year between five banks, 49 states and the federal government. That settlement has been criticized for awarding credit to banks for things they were already doing.

 

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Will the Government Ever Attempt to Enforce the Law Against the Bank of America?


Bank of America is teetering on the edge of collapse. It has received enormous aid from the federal government in bailouts, loans and preferential treatment to the tune of trillions of dollars of government guarantees. To add further injury to the insults already suffered, the federal government, that is, the Obama Justice Department has okayed a settlement protecting Bank of America from lawsuits for its practice of filing false affidavits and inventing ownership of property in American Courts. Yet even with this help, the bank is run so badly that it is still failing.

How long does this go on?

Is the government going to bailout this bank one more time?

What crimes do they have to commit? What incompetence do they have to display? What greed in the form of enormous executive bonuses do they have to display? – before enough is enough and they are allowed to perish?

James Pilant

Bank of America: Too Crooked to Fail | Politics News | Rolling Stone

In a pure capitalist system, an institution as moronic and corrupt as Bank of America would be swiftly punished by the market – the executives would get to loot their own firms once, then they’d be looking for jobs again. But with the limitless government support of Too Big to Fail, these failing financial giants get to stay undead forever, continually looting the taxpayer, their depositors, their shareholders and anyone else they can get their hands on. The threat posed by Bank of America isn’t just financial – it’s a full-blown assault on the American dream. Where’s the incentive to play fair and do well, when what we see rewarded at the highest levels of society is failure, stupidity, incompetence and meanness? If this is what winning in our system looks like, who doesn’t want to be a loser? Throughout history, it’s precisely this kind of corrupt perversion that has given birth to countercultural revolutions. If failure can’t fail, the rest of us can never succeed.

Bank of America: Too Crooked to Fail | Politics News | Rolling Stone

 

 

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Bank of America’s Shifts Derivatives Risk to Taxpayers | The Charlotte Observer Newspaper


Bank of America’s Shifts Derivatives Risk to Taxpayers

Let’s make this simple. Derivatives are speculative instruments used to gamble on the success or failure of some monetary enterprise. Bank of America took these derivatives from one division (uninsured) to another (federally insured). They took a essentially a speculative gamble and moved it into a federally insured institution so that any losses will be born by the federal government.

Isn’t that just sweet?

– Well, it is if you are Bank of America

James Pilant

Lawmakers are criticizing Bank of America Corp. again, this time over the reported transfer of financial instruments from Merrill Lynch into the bank’s deposit-taking arm.

It’s a move the lawmakers say could put taxpayers on the hook for big losses – three years after the bank received billions in bailouts from the federal government.

Lawmakers criticize Bank of America’s transfers | CharlotteObserver.com & The Charlotte Observer Newspaper

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Screw Sam! Reconstruct the Mortgages with their Rightful Owners (via Deadly Clear)


There is a lot of anger in this article. But I too share disgust with this government’s willingness to help out every kind of financial institution while ignoring the needs of the Middle Class. These people no longer have a defender in the government just a facilitator of the predation

James Pilant

Screw Sam! Reconstruct the Mortgages with their Rightful Owners U.S.Seeks Ideas on Renting Out Foreclosed Property By EDWARD WYATT Published: August 10, 2011 WASHINGTON— Uncle Sam wants you — to rent a house from Uncle Sam. The Obama administration said on Wednesday that it was soliciting ideas on how to turn the federal government’s inventory of foreclosed houses into rental properties that could be managed by private enterprises or sold in bulk. The goal, the administration said, is to stabilize neighborhoo … Read More

via Deadly Clear

A Victory for Home Owners in Massachusetts!


The New Bottom Line reports that
This is important. The banks are creatures of the law. They are only private business in a sense. Their accounts are protected by law and they have been given fast and favorable legal methods for foreclosure because in previous decades they had acted the role of responsible capitalism. Now that the banks have demonstrated they are unworthy of foreclosure favoritism, it is time to tighten the legal procedures and make them earn their money by legitimate means.
You may be tempted to argue that they have every right to foreclose on someone who has stopped payments on a home. That would be true if that is the only way they have been working it. But all over this nation, they have been using a somewhat different procedure. A home-buyer calls up and says he has trouble with paying this month’s mortgage. The bank kindly says, “Don’t pay it. Don’t make any payments for three months. That will qualify you for the HAMP program, and we can renegotiate the loan.”
The trusting home owner doesn’t pay for three months then resumes payments. He is stacked with penalty fees for late payments. Concerned, the home owner calls the bank. But the bank never seems to find the time to call him back. Eventually a letter is received saying that he has been denied admission to the government program and all payments including penalties are due now to avoid foreclosure. Then when the unfortunate client is unable to come up with the thousands of dollars in fees, they foreclose. I suspect the bank hands out a bonus and maybe a bottle of champagne per kill.
When the banks act in this manner, the legal procedures designed to protect their profits no longer make sense in a civilized society.
James Pilant