President Obama Warns Banks In State of The Union Address

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President Obama Warns Banks In State of The Union Speech

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January 25th, 2012

Did you watch the State of the Union Address last night?  President Obama said the following about The Great Mortgage Crisis: “In 2008 the house of cards collapsed.  We learned that mortgages were sold to people who could not afford or understand them.  Banks had made huge bets and bonuses with other people’s money.  Regulators had looked the other way or did not have the authority to stop the bad behavior.  It was wrong. It was irresponsible.  And it plunged our economy into a crisis that put millions out of work, saddled us with more debt and left innocent hard working Americans holding the bag.”

Well let’s take a look at what the President said here.  The President said that:The regulators had looked the other way or did not have the authority to stop the bad behavior.”  I agree that the regulators looked the other way, but I do not agree that they did not have the authority to stop the bad behavior.  Neither do they lack the ability to hold them accountable today for their bad behavior.  This is because these banks were selling the same mortgage loans multiple times to multiple investors at the same time. Currently they are fraudclosing on homes where they have incorrectly identified the owner of the debt.  This means that the banks are committing fraud on a massive scale.  The regulators are still “looking the other way”.  This is because there seems to be a crime in progress as we speak, as long as these banks are allowed to fraudclose on properties where they have incorrectly identified the owner of the debt.  That is why I think there should be a foreclosure freeze that allows a process for every single homeowner to have access to a Chain of Title and Securitization check done.  This should be mandatory because the situation does not seem to be isolated.  The government should actually pay for each homeowner to have it done.  This is because the President willingly admits that the regulators looked the other wayThis means the government should be held accountable too.  The implications of this might suggest that the regulators are in bed with banks, unless those very same regulators do something today to stop the potentially irregular, frauduent, illegal, and simply unsafe frauclosure practices of these banks with no further delay.

Previous to the State of the Union, state attorney generals and the Obama Administration met in Chicago.  Many had theorized that the President would announce a weak sweetheart foreclosure settlement with big banks during the State of  The Union.  Instead, President Obama announced a full federal investigation into the fraudulent activities of big banks.

EXCLUSIVE: Obama To Announce Mortgage Crisis Unit Chaired By New York Attorney General Schneiderman

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Date: 1/24/12

WASHINGTON — During his State of the Union address tonight, President Obama will announce the creation of a special unit to investigate misconduct and illegalities that contributed to both the financial collapse and the mortgage crisis.

The office, part of a new Unit on Mortgage Origination and Securitization Abuses, will be chaired by Eric Schneiderman, the New York attorney general, according to a White House official.

Schneiderman is an increasingly beloved figure among progressives for his criticism of a proposed settlement between the 50 state attorneys general and the five largest banks.  His presence atop this new special unit could give it immediate legitimacy among those who have criticized the president for being too hesitant in going after the banks and resolving the mortgage crisis.  He will be in attendance at Tuesday night’s State of the Union address.

“The goal of this joint investigation will be threefold: to hold accountable any institutions that violated the law; to compensate victims and help provide relief for homeowners struggling from the collapse of the housing market, caused in part by this wrongdoing; and to help us finally turn the page on this destructive period in our nation’s history,” reads a White House document outlining the objectives.

“This is a big achievement and something the entire progressive advocacy community wanted [with respect to] housing policy,” added the White House official.

The unit will not supersede the efforts already underway by the Department of Justice. Instead, it will operate as part of the president’s Financial Fraud Enforcement Task Force.  In addition to Schneiderman, the unit will be co-chaired by Lanny Breuer, assistant attorney general at the Criminal Division of the Department of Justice, Robert Khuzami, director of enforcement at the SEC; John Walsh, a U.S. attorney in Colorado, and Tony West, assistant attorney general in the Civil Division at DOJ.

News of the new mortgage unit comes amidst reports of a potential settlement between the five biggest banks, the Obama administration and the state attorneys general.  Under the deal, banks would agree to follow existing laws against abusive foreclosures and set aside $25 billion to both help homeowners who are underwater on their homes or who were wrongfully foreclosed.  The agreement has been in the works for months, with disagreements over the level of legal immunity granted to banks accused of wrongdoing, and the scope of violations covered by the deal.

Critics of the pending settlement have argued that the president should couple the financial relief for homeowners with a robust law enforcement effort targeting lawbreaking by big banks. Schneiderman has been among the settlement’s most prominent critics for months, insisting that a deal not release bankers from criminal charges, and urging AGs to look into violations outside the foreclosure process, including issuing fraudulent loans and improprieties in the packaging of those loans into complex bonds that would become toxic assets. – Huffington Post article

Please contact President Obama and tell him congraulations.  Please also tell him that we want an investigation with real teeth.  Tell him that we need $300 billion in relief for homeowners to reset our economy and bring justice to families. – click here

The President of The United States:

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Complete State of The Union Speech: Click here

The President said: “This new unit will hold accountable those who broke the law.”

This could be the first step in holding these big banks accountable according to the laws of our land. It should never be a policy that payment for crime is good for the economy. Instead, it should be a policy that sends a message to the banks that crime does not pay. Otherwise, it could be very dangerous if we accept that we should look the other way when crime occurs, simply because it helps the economy. For example, there was a time that the world looked the other way when a man named Adolf Hitler thought it would help the German economy to throw the Jews out of their homes. Unfortunately, his Consumer Financial Protection Bureau looked like this – click here

For the record, the banks received enough bailout money to have given each homeowner over one hundred and fifty thousand dollars per homeowner. Now President Obama wants to give us only three thousand dollars a year? Huh? Whatever! Didn’t he just say he wanted it to be fair? How about we start there? (Wink)

At any rate — all eyes are on Richard Cordray of the new consumer agency and Eric Holder of the United States Justice Department. – Click article

I hope they know that the whole world is watching.

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Ex-Bank of the Commonwealth CEO, vice presidents indicted on federal bank fraud charges in Va.

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Written by John Wright

July 14th, 2012

It has been said for some time now that these “higher ups” in the banks have been getting away with the greatest crime ever committed in our nation – if not the worlds history — while they did things such allow their banks to fund loans to people who could not afford the home they were purchasing – but as part of one of the biggest insurance scams this world would ever see. They would accomplish this by funding “fake money” that existed only on a computer – in which they knew would ultimately end up resulting in them fraudclosing on your “real property” in a way that could be described as the LARGEST FRAUDULENT LAND GRAB SINCE THE AMERICAN INDIANS! In the end — it would ultimately collapse the American economy and the American spirit and the American Dream — while leaving the American taxpayer holding the bag and losing their homes.

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Since then not one major bank CEO or executive has been arrested.

That is UNTIL NOW!

Ex-Bank of the Commonwealth CEO, vice presidents indicted on federal bank fraud charges in Va.

 

Piggybankblog posted picture

Cross linked www.washingtonpost.com

By Associated Press, Published: July 12th, 2012

NORFOLK, Va. — The former chief executive of the Bank of the Commonwealth and three former vice presidents have been indicted by a federal grand jury on charges that they conspired to commit bank fraud.The Bank of the Commonwealth opened in 1971 and was headquartered in Norfolk, serving the Hampton Roads community and northeastern North Carolina until it failed in 2011. The bank failure followed an aggressive expansion by the bank beyond its traditional markets of Norfolk and Virginia Beach in 2006 and into northeastern North Carolina and the Outer Banks.

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Those indicted include former chairman and CEO Edward J. Woodward; former executive vice president and chief lending officer Simon Hounslow; and several others.

The indictment unsealed Thursday says the bank set a goal of becoming a billion dollar bank within three years and that by 2009 its assets more than doubled to about $1.3 billion. Most of that growth occurred through brokered deposits, a financial tool that allows investors to pool their money and receive higher rates of return. However, because those deposits are highly volatile, a bank needs to remain well-capitalized to accept and renew brokered deposits.

The indictment says that many of the bank’s loans were funded and administered without regard to industry standards or the bank’s own internal controls. By 2008, the volume of the bank’s troubled loans and foreclosures soared, according to the indictment.

“However, bank insiders were unwilling to fully acknowledge the deterioration in the bank’s loan portfolio. In particular, they were concerned that the bank’s declining health would negatively impact investor and customer confidence, and that capital erosion would affect the bank’s ability to accept and renew brokered deposits,” the indictment says.

The indictment says top executives masked non-performing assets at the bank for their own personal benefit and to the detriment of the bank, which ultimately helped lead to its collapse. Among other things, the indictment says they conspired to conceal the bank’s true condition by funneling bank-owned property to troubled borrowers and overdrawing demand deposit accounts to make loan payments.

The indictment says the bank’s failure will cost the federal government more than $260 million through an insurance fund.

“For more than 30 years, this community put their trust — and their money — in the Bank of the Commonwealth. These charges portray a bank leadership that betrayed that trust for their own profit at the detriment to their own bank, its shareholders and the community it served,” U.S. Attorney Neil MacBride said in a prepared statement.

Woodward served as the bank’s CEO and chairman of its board of directors for more than 30 years until he was forced to step down as chairman in April 2010 and then ultimately forced to retire in December 2010. In addition to the fraud conspiracy charge, he also faces charges for false entry in a bank record, multiple counts of unlawful participation in a loan, multiple counts of false statement to a financial institution, and multiple counts of misapplication of bank funds.

Hounslow was the bank’s executive vice president and chief lending officer. The indictment says he was responsible for operating the bank in a safe manner and keeping the board of directors informed about the bank’s financial condition. He is also charged with misapplication of bank funds, false statement to a financial institution and multiple counts of false entry in a bank record.

Among other things, the indictment says Woodward, Hounslow and Stephen G. Fields, a former executive vice president and commercial loan officer, removed millions of dollars in loans from a past-due report before it was presented to the bank’s board of directors. Also facing charges is Woodward’s son, Troy Brandon Woodward, who was a vice president and mortgage loan specialist until January 2011.

The indictment says bank insiders provided preferential financing to troubled borrowers who were already having difficulty making payments on their loans so they could purchase bank-owned property.

Also indicted were troubled borrowers Thomas E. Arney, who leased office space at the bank’s headquarters and owned a residential development company, and Dwight A. Etheridge, who owned and operated a residential and commercial development company, as well as an employment staffing company.

If convicted, the maximum possible sentence is 30 years in prison. It was not immediately clear Thursday whether those indicted had attorneys.

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Looks like too big to fail did not end up too big for jail after all!

Let them who have an ear — let them hear! The American people shall pour twice the measure into that cup they were about to have us drink from. Yes! I say twice the measure!

Here we come Bank of Destroying the American Dream!

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U.S. Is Building Criminal Cases in Rate-Fixing

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Piggybankblog.posted on 07/15/12

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Cross linked artticle with dadbooknytimes.com

As regulators ramp up their global investigation into the manipulation of interest rates, the Justice Department has identified potential criminal wrongdoing by big banks and individuals at the center of the scandal.

The department’s criminal division is building cases against several financial institutions and their employees, including traders at Barclays, the British bank, according to government officials close to the case who spoke on the condition of anonymity because the investigation is continuing. The authorities expect to file charges against at least one bank later this year, one of the officials said.

The prospect of criminal cases is expected to rattle the banking world and provide a new impetus for financial institutions to settle with the authorities. The Justice Department investigation comes on top of private investor lawsuits and a sweeping regulatory inquiry led by the Commodity Futures Trading Commission. Collectively, the civil and criminal actions could cost the banking industry tens of billions of dollars.

Authorities around the globe are examining whether financial firms manipulated interest rates before and after the financial crisis to improve their profits and deflect scrutiny about their health. Investigators in Washington and London sent a warning shot to the industry last month, striking a $450 million settlement with Barclays in a rate-rigging case. The deal does not shield Barclays employees from criminal prosecution.

The multiyear investigation has ensnared more than 10 big banks in the United States and abroad. With the prospects of criminal action, several firms, including at least two European institutions, are scrambling to arrange deals, according to lawyers close to the case. In part, they are trying to avoid the public outcry that stemmed from the Barclays case, which prompted the resignation of top executives.

The criminal and civil investigations have focused on how banks set the London interbank offered rate, known as Libor. The benchmark, a measure of how much banks charge one another for loans, is used to determine the borrowing costs for trillions of dollars of financial products, including mortgages, credit cards and student loans. Cities, states and municipal agencies also are examining whether they suffered losses from the rate manipulation, and some have filed suits.

With civil actions, regulators can impose fines and force banks to overhaul their internal controls. But the Justice Department would wield an even more potent threat by bringing criminal fraud cases against traders and other employees. If found guilty, they could face jail time.

The criminal investigations come at a time when the public is still simmering over the dearth of prosecutions of prominent executives involved in the mortgage crisis. The continued trouble in the financial sector, including the multibillion-dollar trading losses at JPMorgan Chase, have only further fueled the anger of consumers and investors.

But the Libor case presents a potential opportunity for prosecutors. Given the scope of the problems and the number of institutions involved, the rate-rigging investigation could provide a signature moment to hold big banks accountable for their activities during the financial crisis.

“It’s hard to imagine a bigger case than Libor,” said one of the government officials involved in the case.

The Justice Department has jurisdiction over the London bank rate because the benchmark affects markets in the United States. It could not be learned which institutions the criminal division is chasing next.

According to people briefed on the matter, the Swiss bank UBS is among the next targets for regulatory action. The Commodity Futures Trading Commission is pursuing a potential civil case against the bank. Regulators at the agency have not yet decided to file an action against the bank, nor have settlement talks begun. UBS has already reached an immunity deal with one division of the Justice Department, which could protect the bank from criminal prosecution if certain conditions are met. The bank declined to comment.

The investigation into the global banks is unusually complex and it could continue for years, and ultimately end in settlements rather than indictments, said the officials close to the case. For now, regulators are building investigations piecemeal because the facts of the cases vary widely. That could make it difficult to compile a global settlement, although some banks would prefer an industrywide deal to avoid the harsh glare of the spotlight, said a lawyer involved in the case.

American authorities face another complication as they build cases. Investigators still lack access to certain documents from big banks.

Before gathering some e-mail and bank records from overseas firms, the Justice Department and American regulators need approval from British authorities, according to the people close to the case. But officials in London have been slow to act, the people said. At times, British authorities have hesitated to investigate.

By contrast, the Justice Department and the Commodity Futures Trading Commission have spent two years building cases together. Lanny Breuer, head of the Justice department’s criminal division, has close ties with David Meister, the former federal prosecutor who runs the commission’s enforcement team.

In the Barclays case, the British bank was accused of reporting false rates to squeeze out extra trading profits and fend off concerns about its health. During the crisis, banks feared that reporting high rates would suggest a weak financial position.

Lawmakers in London and Washington are examining whether regulators looked the other way as banks artificially depressed the rates. On Friday, it was disclosed that a Barclays employee notified the Federal Reserve Bank of New York in April 2008 that the firm was underestimating its borrowing costs. Despite the warning signs, the illegal actions continued for another year.

But in April 2008, a senior enforcement official at the Commodity Futures Trading Commission, Vincent McGonagle, opened an investigation. He directed the case along with another longtime official, Gretchen Lowe.

At first the case stalled as the agency waited months to receive millions of pages of documents when Barclays pushed back against the American regulators, according to the officials close to the case. By the fall of 2009, the trading commission received a trove of information, providing a broad view into the wrongdoing.

A series of incriminating e-mail and instant messages, regulators say, laid bare the multiyear scheme. In one document, a Barclays employee said the bank was “being dishonest by definition.”

The case gained further traction in early 2010, when the agency’s enforcement team engaged the Justice Department. The department’s criminal division, led by Mr. Breuer, agreed that regulators had a strong case. The investigation continued until January 2012, when the trading commission notified Barclays lawyers that they were entering the final stages before deciding about an enforcement action.

As part of the deal, regulators pushed the bank to adopt new controls to prevent a repeat of the problems. Among other measures, the bank must now “implement firewalls” to prevent traders from improperly talking with employees who report rates.

The bank says that it provided extensive cooperation during the three inquiries, and has spent around $155 million on its own three-year investigation. Because it agreed to settle with British authorities, Barclays received a 30 percent fine reduction.

In the United States, Barclays offered to pay a fine of $200 million to the C.F.T.C., slightly below the initially proposed range, according to government officials close to the case. Mr. Meister’s team soon accepted the offer, securing the biggest fine in the commission’s history.

On June 27, British and American authorities announced the deal with Barclays, which agreed to pay more than $450 million total. “For this illegal conduct, Barclays is paying a significant price,” Mr. Breuer said then.

Susanne Craig contributed reporting.

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BAROFSKY: No Criminal Charges Against Goldman Tells Us Something About The ‘So-Called’ Financial Task Force

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Piggybankblog posted 08/12/12

Cross linked with businessinsider.com

The SEC has abandoned its attempt to bring criminal charges against Goldman Sachs for any part that it may have had securitizing mortgages before the housing crisis, the FT reports.You may remember that six months ago, Goldman got a Wells notice — the SEC’s infamous calling card — saying that it would be investigated for $1.3 billion worth of subprime mortgage backed securities from 2006. That’s no guarantee that charges are coming. It just means the SEC is looking into the possibility.

So we were all waiting to see what would happen. A slap on the wrist? A trial of the century? Perhaps something in between.

We did not expect criminal charges to be dropped completely.

To find out what dropping the case said about how the SEC would be handling cases going forward, we called Neil Barofsky former TARP Special Inspector, NYU Law Professor, and author of Bailout: An Insider Account of How Washington Abandoned Main Street While Rescuing Wall Street.

We figured he might have something to say about the decision to abandon the case against Goldman. And he did:

“On the sixth month anniversary of the announcement of the so-called financial crisis task force, the twin announcements yesterday that Goldman Sachs and its executives will not be charged by either the Sec or DOJ for conduct directly related to the toxic assets at the heart of the crisis is a stark reminder that no individual or institution has been held meaningfully accountable for their role in the financial crisis. And without such accountability, the unending parade of megabanks scandals will inevitably continue,” Barofsky told Business Insider.

That said there are two things to keep in mind. First, according to the FT, the SEC can still press civil charges against Goldman and collect a few million here, a few million there as they’ve been doing.

Also it’s important to note that the SEC may have dropped the case because the statute of limitations for MBS from 2007 is approaching.

In fact, 2012 is the regulator’s last chance to bring charges for a lot of MBS created in 2006 and 2007 unless the statute of limitations is extended somehow.

In some cases, that could actually happen, says the FT:

People familiar with the matter say the SEC is asking companies and individuals to sign “tolling agreements” to extend the agency’s ability to bring a case after the five year statute of limitations expires. Lawyers involved in investigations expect to see more cases by the November election, given the president’s announcement of a residential mortgage-backed securities taskforce announced in January.

For now, though, it’s status quo antebellum.

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Goldman Sachs Given Clean Bill Of Health By DOJ! What Do HAMP And Financial Crime Unit Have In Common?

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August 10th, 2012

Written by John Wright

The United States Justice Department announced yesterday that it has decided to drop the Goldman financial crisis probe.  This means they will not be pursuing any criminal charges against them.  They said that it was because they could not find that they did anything illegal– source article

“The department and investigative agencies ultimately concluded that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time,” the Justice Department said in a statement late on Thursday.

The DOJ does not typically make public statements when it concludes an investigation.  That is why I thought I would put their statement to the bullshit meter to see if they are telling the truth.

 

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That’s right!  They are actually going to let these SONS OF BITCHES get away with it!  This is even after what Senator Carl Levin exposed about Goldman Sachs in April of last year.  Senator Levin said that GOLDMAN SACHS WAS ONE OF THE MAIN INVESTMENT BANKS THAT CREATED A HUGE MARKET FOR SHODDY RELATED SECURITIES.  THEN PACKAGED AND SOLD THEM USING “DECEPTIVE PRACTICES” WHILE PLACING HUGE BETS AND “SECRET BETS” AGAINST THE VERY SECURTIES THEY WERE SELLING THEIR CLIENTS.

Yah I guess they are right.  That does not sound illegal at all does it?

U.S. Senate Investigations Subcommittee Releases Levin-Coburn Report On the Financial Crisis

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April 13, 2011

WASHINGTON – Concluding a two-year bipartisan investigation, Senator Carl Levin, D-Mich., and Senator Tom Coburn M.D., R-Okla., Chairman and Ranking Republican on the Senate Permanent Subcommittee on Investigations, today released a 635-page final report (PDF, 6MB) on their inquiry into key causes of the financial crisis. The report catalogs conflicts of interest, heedless risk-taking and failures of federal oversight that helped push the country into the deepest recession since the Great Depression.

“Using emails, memos and other internal documents, this report tells the inside story of an economic assault that cost millions of Americans their jobs and homes, while wiping out investors, good businesses, and markets,” said Levin. “High risk lending, regulatory failures, inflated credit ratings, and Wall Street firms engaging in massive conflicts of interest, contaminated the U.S. financial system with toxic mortgages and undermined public trust in U.S. markets. Using their own words in documents subpoenaed by the Subcommittee, the report discloses how financial firms deliberately took advantage of their clients and investors, how credit rating agencies assigned AAA ratings to high risk securities, and how regulators sat on their hands instead of reining in the unsafe and unsound practices all around them. Rampant conflicts of interest are the threads that run through every chapter of this sordid story.”

“The free market has helped make America great, but it only functions when people deal with each other honestly and transparently. At the heart of the financial crisis were unresolved, and often undisclosed, conflicts of interest,” said Dr. Coburn. “Blame for this mess lies everywhere from federal regulators who cast a blind eye, Wall Street bankers who let greed run wild, and members of Congress who failed to provide oversight.”

The Levin-Coburn report expands on evidence gathered at four Subcommittee hearings in April 2010, examining four aspects of the crisis through detailed case studies: high-risk mortgage lending, using the case of Washington Mutual Bank, a $300 billion thrift that became the largest bank failure in U.S. history; regulatory inaction, focusing on the Office of Thrift Supervision’s failed oversight of Washington Mutual; inflated credit ratings that misled investors, examining the actions of the nation’s two largest credit rating agencies, Moody’s and Standard & Poor’s; and the role played by investment banks, focusing primarily on Goldman Sachs, creating and selling structured finance products that foisted billions of dollars of losses on investors, while the bank itself profited from betting against the mortgage market.

New Evidence. Today’s report presents new facts, new findings and recommendations, with more than 700 new documents totaling over 5,800 pages. It recounts how Washington Mutual aggressively issued and sold high-risk mortgages to Wall Street, Fannie Mae, and Freddie Mac, even as its executives predicted a housing bubble that would burst, and offers new detail about how its regulator deferred to the bank’s management. New documents show how Goldman used net short positions to benefit from the downturn in the mortgage market, and designed, marketed, and sold CDOs in ways that created conflicts of interest with the firm’s clients and at times led to the bank’s profiting from the same products that caused substantial losses for its clients. Other new information provides additional detail about how credit rating agencies rushed to rate new mortgage-backed securities and collect lucrative rating fees before issuing mass ratings downgrades that shocked the financial markets and triggered a collapse in the value of mortgage related securities. Over 120 new documents provide insights into how Deutsche Bank contributed to the mortgage mess.

“Our investigation found a financial snake pit rife with greed, conflicts of interest, and wrongdoing,” said Levin. – read rest of article on report of financial crisis

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Yah!  What he said!

In the end I guess we find out that President Obama’s HAMP program and his newly announced Financial Crime Unit he announced in the State of The Union speech might have something in common.

BOTH FAILED THE AMERICAN PEOPLE AND REWARDED ALL THE BANKS!

I say – “Vive La Greece!”

(Dramatic license used)

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Attorney For Goldman Sachs CEO Is Eric Holder’s ‘Best Friend’

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Piggybankblog posted on08/28/12

Cross linked with breibart.com

The crony connections just keep on coming over at Eric Holder’s Department of Justice.

Last week, the Justice Department announced that it will not prosecute Goldman Sachs or any of its employees in a financial probe.

Could that be because the attorney for Goldman Sachs CEO Lloyd Blankfein was none other than Attorney General Eric Holder’s “best friend” and former personal attorney, Reid Weingarten?

Or because in 2008, Goldman Sachs employees donated $1,013,091 to Barack Obama?

Or because Goldman Sachs is the former client of Eric Holder’s and Assistant Attorney General Lanny Breuer’s law firm, Covington & Burling?

The conflicts of interest and cronyism at Holder’s Department of Justice are so many that it took a 27-page report by the Government Accountability Institute to catalog them all.

And lest one forget: Holder’s best friend Reid Weingarten–who previously represented child rapist Roman Polanski–is also the lawyer for former MF Global treasurer Edith O’Brien. On Thursday, the New York Times reported that Holder’s Justice Department will not be criminally charging Jon Corzine or any MF Global executives in that case either.

Weingarten, who calls himself a “hard-core child of the ‘60s,” apparently has a soft spot for Wall Street fat cats. “I feel like I’m in the French Revolution, defending the nobility against the howling mob,” Weingarten told Bloomberg in 2002.

So, to recap, Goldman Sachs, which donated $1,013,091 to Barack Obama in 2008 and whose CEO is represented by Holder’s best friend, will not face prosecution.

Nor will Obama bundler Jon Corzine, who raised at least $500,000 for Barack Obama.

Indeed, Eric Holder’s Department of Justice has not charged, prosecuted, or convicted a single top Wall Street executive.

Alas, pay-to-play justice and the Chicago Way are alive and well.

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Eric Holder Justice Department Recruits Dwarfs, Schizophrenics, and the ‘Intellectually Disabled’

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Piggybankblog posted on 08/28/12

Cross linked with pjmedia.com

The PJ Tatler has obtained documents from the Justice Department detailing efforts to recruit attorneys and staff who are dwarfs or who have psychiatric disabilities or “severe intellectual disabilities.” On May 31, 2012, Assistant Attorney General Tom Perez issued a directive to affirmatively recruit people with these “targeted disabilities.”

This DOJ policy does not merely involve prohibitions against discrimination, but rather the documents reveal deliberate recruitment efforts to hire as attorneys and staff for the Department of Justice people suffering from psychiatric disorders and intellectual disabilities. Moreover, applicants can “self-identify” their disability by means of the “Standard Form 256, Self Identification Disability.”

Those with “targeted disabilities” may be hired through a “non-competitive” appointment. That means they don’t have to endure the regular civil service competition among applicants, but can be plucked from the stack of resumes and hired immediately instead.

According to the documents, those with these “targeted disabilities” may be hired “before the position is advertised” and even “before the position’s closing date.” Moreover, lawyers with psychiatric disabilities and “severe intellectual” disabilities receive a waiver from the requirement that a new DOJ employee have practiced law for one year before being hired.

You can read the detailed Civil Rights Division “Hiring of Persons With Targeted Disabilities Policy” memo here.

You can also read PJ Media’s full report on the attorneys hired for the Justice Department Civil Rights Division from 2009-2010 here in the Every Single One series.

Speaking of preferences, here is another document, the entire Operational Diversity Management Plan,” obtained by PJ Media. It should be fascinating to those interested in racial preferences in government policy.

John Wright: Are they saying this youtube below is what they hired to investigate the greatest bank crime in history?

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Well that would explain a lot.

(Shaking my head and rolling my eyes)

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Too Big To Jail: Wall Street Executives Unlikely To Face Criminal Charges, Source Says

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Piggybankblog posted on 09/09/12

Cross linked with huffingtonpost.com

A last-ditch effort by federal and state law enforcement authorities to hold Wall Street accountable for nearly bringing down the U.S. economy is unlikely to lead to any criminal charges against big bank executives, according to a source close to the investigation.

Barring a “hail mary pass,” said the source, who spoke on the condition of anonymity because the investigation is still ongoing, the members of a task force President Barack Obama formed in January to investigate fraud in the residential mortgage bond industry will instead most likely bring civil lawsuits against some of the banks involved, though it isn’t clear when these cases might come.

That means any penalties for those accused of fraud or other misconduct would be measured in dollars, not jail terms.

A spokesman for New York Attorney General Eric Schneiderman, a co-head of the task force and the driving force behind its formation, declined to comment.

Adora Andy, a Department of Justice spokeswoman, said in a statement that “all appropriate remedies, civil and criminal, are on the table.”

“As always, if working group members uncover evidence of fraud or other illegal conduct, we will pursue such conduct aggressively,” Andy said.

The subprime mortgage bubble popped more than five years ago, triggering a full-fledged economic meltdown. Since then, the question confronting regulators and government prosecutors has been whether the banks that drove the market’s expansion simply made terrible business decisions, or committed fraud in order to reap short-term profits.

The Securities and Exchange Commission, in a number of civil lawsuits, has alleged the latter (as a regulatory agency, the SEC cannot bring criminal suits). But with the exception of one failed case against Bear Stearns in 2009, the Department of Justice, which historically would lead any criminal effort, has declined to criminally prosecute those who created the financial instruments built out of toxic mortgage loans.

By pooling investigative resources, it was hoped that the Justice Department, the SEC and a handful of state attorneys general, led by Schneiderman, could accomplish what the agencies had mostly failed to deliver on their own: a sense of justice, however fuzzily defined.

But from the start, the task force — officially, the Residential Mortgage-Backed Securities Working Group — has been dogged by critics questioning the seriousness of the effort, and by concerns that the legal timeframe in which investigators must bring cases is coming to a close.


Civil cases, if and when they are filed, could lead to large financial penalties and possibly aid for struggling homeowners. Yet it seems unlikely that such a result will satisfy those whose anger sparked the
Occupy Wall Street movement, or even many middle-class Americans who may wonder how, in contrast to other financial crises, this one could end with none of the people who seemingly helped orchestrate it behind bars.

“Without accountability, the unending parade of megabank scandals will inevitably continue,” Neil Barofsky, the former watchdog over the $700 billion bank bailout fund and a frequent critic of the Obama administration’s response to the financial crisis, recently told The Huffington Post.

How and why the government chose this path will be the subject of debate for years to come. Some say prosecutors lacked resources. Others assert that the complexity of the financial transactions makes it virtually impossible to prove criminal intent in court, where prosecutors must convince a jury of guilt “beyond a reasonable doubt.” In a civil action, by contrast, the bar is lower: jurors need only conclude that “a preponderance of evidence” indicates guilt.

One former prosecutor said a simpler human dimension may also be preventing government lawyers from filing criminal charges: the basic fear of losing a big case.

“Losing has a chilling effect, because no one wants to take a spin like that and come out on the short end,” said Cliff Stricklin, a former prosecutor who worked on the Enron task force and also successfully prosecuted Qwest Communications chief executive Joseph Nacchio for accounting fraud. (Nacchio is currently serving a seven-year sentence in a federal prison.)

“[Losing a case] makes you wonder if there was indeed a crime, and if so, how you go about proving it,” Stricklin said. “It is a signal to the public that either the government is jumping to conclusions or isn’t competent.”

 

CATASTROPHE OR CRIME?

Mary Jo White, a former U.S. attorney for the Southern District of New York, adheres mostly to the view that the financial crisis was a catastrophe, but not a crime. Now a prominent defense attorney at the law firm Debevoise & Plimpton, White said she thinks calls from some quarters for more criminal prosecutions are unwarranted.

“The financial crisis was so expensive and so many people were injured that one’s instinct is to think that there must have been massive wrongdoing from the top on down,” she said.

But criminal cases must be built on compelling evidence, not suppositions, and evidence of broad-based misconduct that would rise to that level doesn’t exist, White said.

“I don’t think the criticism is fair,” White said.

William Black, a law professor at the University of Missouri-Kansas City and a prominent former bank regulator, is in the camp that thinks prosecutors have missed a massive opportunity.

“They don’t get the whole concept of looting,” he said.

Black, who worked with prosecutors to develop some of the 1,100 criminal cases that emerged from the Savings & Loan crisis of the late 1980s and early 1990s, said that Wall Street accounting fraud flows from a simple recipe: grow by buying high-interest loans, leverage the business by borrowing lots of money and keep next to nothing in reserve against losses.

“You are mathematically guaranteed to report record profits,” he said.

But those profits are based on a fiction, he said, one that costs investors when the bank collapses — and in some cases, can cost taxpayers too.

Financial firms like Goldman Sachs profited tremendously by purchasing loans described widely in the industry as “liar’s loans,” Black said. These loans were made without the borrower having to prove income, or even that he or she had a job.

“It makes no sense that an honest lender would ever make liar’s loans,” he said. Nor does it make sense that a sophisticated bank like Goldman, which runs an entire business based on the ability to calculate risk, would purchase such dangerous loans without knowing that they were toxic, he said.

Indeed, the Financial Crisis Inquiry Commission produced evidence last year which suggests that Goldman Sachs traders knew these investments were more dangerous than they were letting on to their customers. Internally, they characterized offerings as “junk” and “monstrosities” even as they offloaded the mortgage bonds onto investors, according to the report.

The SEC came to the same conclusion when investigating whether the bank had misled investors about a product known as Abacus. That probe led to a $550 million settlement in 2010.

The SEC has won $2.2 billion in penalties stemming from financial crisis-related cases, though it has been dogged by complaints — most notably from federal judge Jed Rakoff — that its fines are too small and that it doesn’t target individuals often enough. An SEC spokesman declined comment.

Still, the agency’s efforts to pursue financial crisis fraud far outstrip those of the Justice Department.

The government’s lone criminal case related to the creation of complex mortgage investments came in 2009, when a federal jury declined to convict two former Bear Stearns hedge fund managers accused of lying to investors about the soundness of the securities they were selling.

Last month, the Justice Department announced that it had dropped a probe of Goldman Sachs, launched after the Senate’s Permanent Subcommittee on Investigations found that the bank sold investments “in ways that created conflicts of interest with the firm’s clients and at times led to the bank’s profiting from the same products that caused substantial losses for its clients.”

There was “not a viable basis” to bring criminal charges against the bank or its employees, the Justice Department said in a statement explaining its decision.

 

LAST CHANCE FOR PROSECUTORS

Obama’s multi-agency mortgage task force was supposed to succeed where previous investigations had failed.

“This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans,” Obama said in his State of the Union address in January.

The goal of the new unit was to drill down into the sophisticated financial instruments the banks created to package and sell mortgages in a search for fraud. But the group was met with skepticism from many legal experts, who wondered how this effort would be any different from previous investigations.

The group got off to a rocky start. Three months after its formation, it had failed even to secure office space. In May, Schneiderman told the Wall Street Journal that he wanted more resources and wished that investigators at his partner agencies would pick up the pace.

According to the Justice Department, the investigation is now in full swing.

More than 200 investigators are on the job, “devoting significant resources to investigate and prosecute misconduct by financial institutions in the origination and securitization of mortgages,” the agency said in a statement.

The DOJ has issued 30 civil subpoenas in the past four months, it said, and the SEC has issued more than 300 — though that number includes pre-existing investigations.

The New York attorney general’s office, HuffPost previously reported, is now investigating several major institutions.

But if none of these cases yield a criminal indictment, who, if anyone, is to blame?

Schneiderman, though he never promised criminal cases, is likely to attract some criticism for the lack of prosecutions due to his aggressive advocacy for the task force. Last year, Schneiderman led an insurgency against a robo-signing settlement shaping up between state attorneys general and five large banks. His goal, he said, was to preserve his ability to continue an investigation he had opened in the spring into possible fraud that led to the housing bubble and crash.

The states leading the negotiations dispute that Schneiderman’s ability to continue his investigation was ever in doubt. Nevertheless, his initial opposition to what became a $25 billion deal led directly to the creation of the task force.

Schneiderman co-leads the task force, along with Robert Khuzami, the enforcement director of the SEC; Lanny Breuer, the head of the criminal division at the Justice Department; Stuart Delery, the head of Justice’s civil division; and John Walsh, the U.S. Attorney for the District of Colorado.

Though each of these entities are sharing documents and resources, it is up to the individual agencies to file charges.

The biggest challenge for Schneiderman, who took office in January 2011, was the ticking clock. Most mortgage bonds were packaged and sold in 2006 or earlier, and the statute of of limitations on most types of fraud cases is five years from the commission of the alleged wrongdoing.

It is possible to extract “tolling” agreements from a business or individual under investigation that effectively extends the allotted time in which to bring a case, in exchange for more lenient treatment. But Schneiderman would have had to enact tolling agreements in very short order after taking office. It isn’t clear whether a bank or an individual would accept such an agreement in a criminal case if they knew the statute of limitations was about to run out.

It is also true that while the New York attorney general’s office has the authority to bring criminal fraud cases, it historically almost never does. Like the SEC, the office instead typically files lawsuits with the expectation of wringing a settlement — and political bragging points — out of a Wall Street firm. It’s part of the recipe that both Andrew Cuomo and Eliot Spitzer used to pave their way to a governorship.

Instead, the attorney general’s office typically defers to the Department of Justice, which has a large team of experts parked in the U.S. attorney’s office just a few blocks away in lower Manhattan. But instead of taking on Wall Street’s top executives, that office has focused on alternate cases — such as the recent prosecution of hedge fund king Raj Rajaratnam, who was convicted of insider trading.

Stricklin, now in private practice at the Bryan Cave law firm in Denver, said that he doesn’t know whether there was criminal conduct in the run-up to the financial crisis.

“The truth is more complicated than can be explained in sound bites,” he said.

But he has seen, he said, a decline in the talent level of those working white-collar cases at agencies like the Federal Bureau of Investigation and the Justice Department, which over the past decade have diverted some of the most talented people over to counterterrorism.

“The government needs to decide if it is really going to tackle white-collar crime or not, and if so it needs to allocate resources,” he said.

Otherwise, the result will be fewer cases, and more losses, Stricklin said.

“It always matters to bring solid criminal cases where you are holding people accountable,” he said. “But the worst signal is not to do nothing, but to do something partway.”
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When It Comes to the DoJ and Wall Street, Don’t Call It “Justice”

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Piggybankblog posted on 09/12/12

Piggybankblog posted picture

Cross linked with huffingtonpost.com

If a recent report is true the Justice Department will need a new name — and some of us will have to step up and admit we were wrong.

It was clear that the foreclosure fraud settlement which the Administration and most states reached with major US banks was a great deal for the big banks — and a lousy deal for the public. But some of us found reason to hope against hope that the settlement would be accompanied by real investigation of crooked bankers, after years of flim-flammery and disgraceful inaction by the Justice Department.

Not that we were entirely naïve. The Administration’s track record was poor. and even had a slight resonance of bad faith. when it came to prosecuting Wall Street criminality. So, speaking only for myself, that cautious support came with renewed pressure on the Administration to back its words with action.

Some of us knew that, pace Pete Townshend, we very well might get fooled again.

“The hypnotized never lie …”

Now it looks like we were — fooled again, that is. From a report published this weekend in the Huffington Post:

A last-ditch effort by federal and state law enforcement authorities to hold Wall Street accountable for nearly bringing down the U.S. economy is unlikely to lead to any criminal charges against big bank executives, according to a source close to the investigation.

 

The Huffington Post’s anonymous source said that instead of criminal indictments, the task force “will instead most likely bring civil lawsuits against some of the banks involved.” That would most likely mean more of what we’ve seen so far: Bankers earn hefty salaries and bonuses by committing crimes. Punishment is restricted to fines, which are paid by the bank and not the bankers — giving them absolutely no reason not to do the same thing again.

Gee, what a surprise —

– not. In the months since the President boasted of the beefed-up task force in his State of the Union message, reports (including our own) have suggested that the Justice Department consistently refused to provide it with even the minimal resources it had requested. (It had asked for roughly 100 to 200 staffers, depending on the sources cited, as opposed to more than 1,000 which were assigned to the much smaller savings and loan scandal of the 1980s.)

In case the chain of command is unclear, let’s spell it out: Everyone at the Justice Department reports to Attorney General Eric Holder. Holder reports to the President of the United States.

The Record

Barack Obama took office as the economy was suffering a massive collapse brought on by widespread Wall Street fraud. It wasn’t a good sign when he appointed Eric Holder, a highly-paid attorney for the prominent Wall Street law firm Covington & Burling, to act as the nation’s chief law enforcement officer. While it’s certainly possible for talented attorneys to move from defense to prosecution or vice versa, when it comes to Wall Street Holder has managed the Justice Department like … well, like a highly-paid attorney for a prominent Wall Street law firm.

First Holder tried to buffalo the public into believe he was fighting mortgage fraud with a deceptive publicity scam called “Blind Trust — which the Columbia Journalism Review reviewed with the headline, Obama Administration’s Financial Fraud Stunt Backfires.”

Then Holder declined to prosecute anyone for the misdeeds of the AIG Financial Products group (note: I was a midlevel AIG executive in another part of the organization), despite the massive evidence of potentially criminal wrongdoing compiled the Levin Subcommittee and others.

(See Law and Order: AIG for, among other things, a chronology of events which includes an investor call in which executives made statements which their independent accounting firm considered false. There’s a name for what happens when executives make false public statements about the material condition of their firm. That name is “investor fraud.”)

The Holder Justice Department also declined to prosecute anyone at GE Capital, much to the astonishment of SEC investigators who had not only identified multiple instances of investor fraud but had identified specific individuals in the accounting department who had compiled and released the fraudulent information.

A Class Act

Journalist Michael Hudson compiled evidence of additional misdeeds regarding subprime mortgages at GE Capital. Its CEO, Jeffrey Immelt, lavished praise on an executive whose company he bought with a fortune in shareholder money.

What was that company? As Hudson notes, it

was a place where erstwhile shoe salesmen, ex-strippers and even a former porn actress could sign on as sales reps and make big money pushing home loans. WMC’s top salespeople earned a million dollars a year or more and lived fast, swigging $1,000 bottles of Cristal and wheeling around in $100,000 Ferraris and Bentleys.

 

And when an investigator tried to put the brakes on fraudulent activity in that operation, Immelt’s GE Capital sidelined him so that the party could continue. Not only was the firm spared any indictments, but the Treasury Department and Federal Reserve bent the rules so that it could be bailed out!

Not that its executives escaped punishment altogether. Immelt was sentenced to attend multiple public meetings — as the head of the President’s Economic Advisory Panel. (They even renamed the group when Immelt took over, calling it a “Jobs and Competitiveness Panel.” That might have been a bit of mordant humor on someone’s part, given Immelt’s record of outsourcing American jobs overseas.)
Fraud=Settlement

What about that $25 billion foreclosure fraud settlement, which paid out less than $2,000 to people who had lost their homes through illegal foreclosure? We gave that deal a failing grade on all five criteria we’d defined for scoring the agreement: openness, justice, restitution, deterrence, and reconciliation. But we thought there was a possibility that some its provisions could be used to restore some measure of justice — especially if it led to criminal indictments.

Apparently not.

And as we suspected and feared, the penalties and restitution won’t even amount to $25 billion. Banks are being “credited” for actions they were already taking before the settlement came along (shades of “Blind Trust”).

Among the crimes involved in that settlement: Forgery and perjury, in the mass filing of notarized documents which falsely state that the person signing the document has seen and reviewed all the documents which prove that the bank is entitled to foreclose on a property. (That’s what they call “robo-signing” — since a false notarized document is a form of perjury, a better name would be “robo-crime.”)

Robo-signing is one of many forms of bank lawbreaking which turned into a crime wave in recent years. And while the banks have promised to stop, Wells Fargo — one of the banks who signed the deal — illegally foreclosed on the same house last week for the second time. And they hired a firm to do it that was so sleazy its employees apparently vandalized and robbed the property when they raided it a second time.

How did they get permission to foreclose on this home, which the owners owned outright and which had no mortgage, unless they filed false documents twice stating that they had the proper documentation in hand to seize it?

The Big Sting

Then there’s the enormous area of investor fraud, in which these banks bundled and sold mortgages to investors — including many pension plans and public institutions — which they knew were likely to fail. In fact, the entire “liar’s loan” industry was built around writing bad mortgages and then defrauding investors into buying them.

It’s like The Sting, multiplied a millionfold and unleashed on the entire country. (And considerably less photogenic leading actors. Blankfein and Immelt may be shrewd operators, but Redford and Newman they ain’t.)

The racketeers even built a phony shell company and an electronic database to expedite their fraud.
As it turns out, Housing and Urban Development audits of banks involved in the settlement showed that all of them had hidered investigation into their misdeeds. That makes the deal even more of a travesty than it initially seemed to be, since it means the banks made it impossible to know how much criminality they were guilty of – or how high in the organization the culpability went — before the deal was done.

Investigators were polite in their language — always saying “failed to maintain controls” while describe ongoing patterns of deliberate misrepresentation, and taking banks at their word sometimes when bankers claimed they couldn’t locate vital records — but the picture they paint is clear. It consistently includes phrases like “Probable violations of the False Claims Act” in addition to providing descriptions of better known crimes.

And while the False Claims Act is a civil statute, the politically connected lobbying and law firm Arent Fox correctly notes that “there are many criminal statutes … that are close analogs … it is essential to consider if there is any basis present for possible criminal liability as well.”

The audits even include remarkable sentences like this one: “Wells Fargo told us that we could not interview the other (employees) because they had reported questionable affidavit signing or notarizing practices when it interviewed them. ”

Oh, well in that case never mind.

We’ve provided excerpts from the audits below: Read ‘em and weep.

Drone Fraud

But then, Wells Fargo bankers weren’t even indicted for laundering money from the Mexican drug cartels that have murdered 65,000 people (use detail from that piece). Why would they worry about indictments for obstructing justice, or for something as trivial as defrauding the US taxpayer? (That’s what the False Claims Act addresses.)

It was a dead giveaway when the so-called “Justice” Department declined to prosecute Goldman Sachs for its apparent defrauding of customers, or for what appeared to be perjury when senior executives appeared before Senate investigating committees.

Why has the Justice Department let all these wrongdoers go free? There’s been a shifting panoply of excuses. There was the “no laws were broken” excuse, dutifully echoed by both Barack Obama and Tim Geithner, but there’s overwhelming evidence of lawbreaking to refute that claim.

There’s also many billions of dollars paid out in fraud settlements. But then, the crooks themselves don’t pay those settlements and fines. Their shareholders do — sometimes for acts of fraud against the shareholders themselves. That aside, did these multi-billion-dollar frauds commit themselves?

That suggests a new concept: “drone fraud,” a form of crime which takes place without any individuals present to commit it.

What Real Prosecutors Can Do

The Justice Department is also fond of complaining that getting convictions in financial fraud cases is too hard because the details are complicated. Leaving aside the absurdity of the excuse-making — what would townsfolk do if their police chief said “I’d arrest those crooks, but it’s pretty hard work chasing those boys” — there are thousands of convictions to disprove this argument. There are, for example:

More than 1,000 convictions obtained (mostly be Republican Justice Departments) in the far smaller Savings and Loan scandal.

Nineteen executives who were convicted or offered guilty pleas in the Enron scandal.

Two senior executives convicted in the Tyco scandal.

(Those convictions were obtained under Republican President George W. Bush, whose record of pursuing corporate crime is actually superior to Obama’s at this point.)

Two brokers convicted in a municipal bond big-rigging scandal.

There’s more, but you get the idea.

Higher Authority

Of course, the Huffington Post piece could be wrong. Justice — real justice — could be right around the corner. The Post’s anonymous informant even said a criminal indictment might come as the result of a “Hail Mary pass.”

The term “Hail Mary pass” has come to describe any action performed against near-impossible odds in the hope that a miracle will happen. Older football fans know that it was coined after Catholic quarterback Roger Staubach explained a seemingly impossible winning touchdown pass by saying “I closed my eyes and said a Hail Mary.”

From the looks of things it’s going to take some sort of divine intercession for justice to be done on Wall Street. The current management doesn’t seem all that interested.

By Any Other Name

We thought the Administration and the Justice Department might at least try to take action. Whatever the outcome, indictments alone can discourage wrongdoing. There’s a deterrent effect when wrongdoers know that they may face a jury. They may get off in the end, but even the wealthiest Wall Street executive would prefer to avoid the experience.

So why is the Attorney General, along with others in the Administration, arguing against indicting Wall Street bankers? When there’s a preponderance of evidence suggesting a crime was committed, it’s the defense attorney’s job to argue there wasn’t — or that it will be too hard to obtain a conviction. It’s the defense attorney who usually meets with reporters to explain why the case won’t hold up.

What do you call a Justice Department that would rather do the defense’s job than its own? “Covington & Burling” is already taken. If these reports are true, the Department will definitely need that new name. But whatever you call it, don’t call it ‘justice.’

__________________________

AUDIT EXCERPTS

For Ally Financial:

“Our review was significantly hindered by Ally’s refusal to allow us to interview responsible personnel and its failure to provide the documentation we requested in a timely manner. At our request, Ally gave us a list of employees responsible for signing affidavits. We attempted to interview these employees to determine whether they properly processed foreclosure affidavits but were told by Ally’s attorneys that we could not do so. … Individual counsel for each of the employees objected, citing Fifth Amendment concerns – (note to Holder Justice Department: that’s the one about not testifying if your answers would “tend to incriminate you”) – and we were prohibited from interviewing them.

“Ally also failed to produce requested documents and other information in a timely manner. Therefore, we served Ally with two Inspector General subpoenas on December 6, 2010. The information and data it provided in response to our two subpoenas were incomplete …”

For Wells Fargo:

“Wells Fargo provided a list of 14 affidavit signers and notaries and then initially restricted our access to interview them. Wells Fargo attorneys interviewed them first and then only allowed us to interview 5 of the 14 affidavit signers. Wells Fargo told us that we could not interview the others because they had reported questionable affidavit signing or notarizing practices when it interviewed them. After discussion with attorneys for Wells Fargo and OIG counsel, terms were agreed to, permitting us to interview these remaining nine persons. The terms that Wells Fargo set required that Wells Fargo management and attorneys attend all of the interviews as facilitators. This condition resulted in delays and may have limited the effectiveness of those interviews.

“Wells Fargo’s terms also required that persons we interviewed have private counsel present on their behalf. Wells Fargo chose the private counsel and paid the attorney fees of the persons we interviewed. Wells Fargo was not timely in arranging the private attorneys, which further delayed our interviews. However, as our work progressed and through other research, we began identifying many more affidavit signers and notaries that Wells Fargo did not disclose to us initially. Wells Fargo ultimately disclosed 35 persons, and we interviewed 33 of them (22 affidavit signers and 11 notaries).”

For JPMorgan Chase, whose CEO Jamie Dimon is the frequent recipient of lavish praise from the press and the President:

“Our review was hindered by Chase’s reluctance to allow us to interview employees outside the presence or involvement of its management staff or attorneys; therefore, the effectiveness of those interviews was limited. On a number of occasions during the interviews, Chase’s management or attorneys clarified statements provided by staff. In addition, Chase did not provide read-only access to its mortgage servicing systems, which would have allowed us to independently verify the amounts on the affidavits and assess the reliability of the data to facilitate a better understanding of Chase’s internal controls.

“Chase was unable to provide electronic production records for all operations specialists during our review period. Chase’s production records, prepared using Microsoft Excel, identified the persons who prepared each foreclosure package and signed the affidavits. However, for the records provided, all of the data fields were not always complete, and Chase did not provide a point of contact, who could explain and clarify the data. Further, Chase provided the production reports nearly 4 months after our initial request. As a result, it was not possible to know whether Chase omitted from the records information that was relevant to our review.”

The results were similar for Bank of America and Citigroup.

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Lanny Breuer Admits That Economists Have Convinced Him Not to Indict Corporations

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Piggybankblog posted 09/14/12

Piggybankblog posted all pics

Cross linked with emptywheel.net

I’ve become increasingly convinced that DOJ’s head of Criminal Division, Lanny Breuer is the rotting cancer at the heart of a thoroughly discredited DOJ. Which is why I’m not surprised to see this speech he gave at the NYC Bar Association selling the “benefits” of Deferred Prosecution Agreements. (h/t Main Justice) He spends a lot of his speech claiming DPAs result in accountability.

“And, over the last decade, DPAs have become a mainstay of white collar criminal law enforcement.

The result has been, unequivocally, far greater accountability for corporate wrongdoing – and a sea change in corporate compliance efforts. Companies now know that avoiding the disaster scenario of an indictment does not mean an escape from accountability. They know that they will be answerable even for conduct that in years past would have resulted in a declination. Companies also realize that if they want to avoid pleading guilty, or to convince us to forego bringing a case altogether, they must prove to us that they are serious about compliance. Our prosecutors are sophisticated. They know the difference between a real compliance program and a make-believe one. They know the difference between actual cooperation with a government investigation and make-believe cooperation. And they know the difference between a rogue employee and a rotten corporation.

[snip]

One of the reasons why deferred prosecution agreements are such a powerful tool is that, in many ways, a DPA has the same punitive, deterrent, and rehabilitative effect as a guilty plea: when a company enters into a DPA with the government, or an NPA for that matter, it almost always must acknowledge wrongdoing, agree to cooperate with the government’s investigation, pay a fine, agree to improve its compliance program, and agree to face prosecution if it fails to satisfy the terms of the agreement. All of these components of DPAs are critical for accountability.”

But the real tell is when he confesses that he “sometimes–though … not always” lets corporations off because a CEO or an economist scared him with threats of global markets failing if he held a corporation accountable by indicting it.

“To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs, and economists who argue that the collateral consequences of an indictment would be devastating for their client. In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects. Sometimes – though, let me stress, not always – these presentations are compelling. [my emphasis]“

None of this is surprising, of course. It has long been clear that Breuer’s Criminal Division often bows to the scare tactics of Breuer’s once and future client base. (In his speech, he boasts about how well DPAs and NPAs have worked with Morgan Stanley and Barclays, respectively.)

It’s just so embarrassing that he went out in public and made this pathetic attempt to claim it all amounts to accountability.

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Piggybankblog posted 60 Minutes interview in December of 2011

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Mortgage Task Force Set To Take Action Over Financial Crisis

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Piggybankblog posted on 09/21/12

Cross linked with huffingtonpost.com

NEW YORK (Reuters) – The mortgage task force formed by President Barack Obama to probe misconduct that contributed to the financial crisis will soon take legal action, New York Attorney General Eric Schneiderman said on Thursday.

Schneiderman, a co-chair of the task force, would not say whether cases would be brought against individuals or financial institutions. He also would not comment on whether criminal charges would be filed.

But he said his office would take action and that he expected his federal counterparts on the task force to do so as well.

“We’ll see actions being taken sooner rather than later,” said Schneiderman, speaking in an interview at his office in New York.

The Residential Mortgage-Backed Securities Working Group was formed in January, to probe the pooling and sale of risky mortgages in the runup to the 2008 financial crisis. Obama said he was creating the group to “hold accountable those who broke the law” and “help turn the page on an era of recklessness.”

Schneiderman said he believes it is still necessary to go after the “bad actors” to restore confidence in the financial markets.

“It’s important to convey the sense that no one is above the law. There’s a set of rules to which all will be held accountable, including big players on Wall Street,” Schneiderman said.

Schneiderman noted that only days earlier protesters had gathered in a park nearby to mark the first anniversary of the Occupy Wall Street movement.

Last year, Schneiderman fought to limit the scope of a $25 billion settlement with major banks over foreclosure abuses. He wanted authorities to retain the ability to probe misconduct in the securitization of mortgages, the area now being investigated by the task force.

The task force includes the Justice Department, the Securities and Exchange Commission, the Department of Housing and Urban Development and the Internal Revenue Service.

Schneiderman said the group, which has been criticized for inaction, had taken a few months to staff up. He said he was optimistic resources would continue to expand.

“History will show the working group acted pretty quickly given the circumstances,” he said. “The important thing is to see results and then continued results … (that) we don’t just have one or two cases and then this peters out.”

Another law enforcement official involved with the task force told Reuters on Wednesday that any action from the task force was more likely to be civil than criminal.

In the interview on Thursday, Schneiderman said he could not comment on whether there would be criminal charges.

When the group was formed, Attorney General Eric Holder announced civil subpoenas had been sent to 11 financial institutions. But little information has been made public since then.

(Reporting by Karen Freifeld; Additional reporting by Emily Flitter; Editing by Eddie Evans, Gary Hill)

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Supreme Court gives banks foreclosure win

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Piggybankblog posted on 10/01/12

Cross linked with lvrj.com

The Nevada Supreme Court has sided with banks by validating a key cog in the foreclosure enforcement machinery that has sparked legal disputes all over the country.

In a 26-page ruling delivered Thursday, all seven justices agreed that hundreds of thousands of home mortgages in the state involving the Mortgage Electronic Registration System Inc. could be put into foreclosure after technical adjustments.

As foreclosures mounted in the past five years, consumer groups and attorneys have targeted MERS as hiding the identity of the actual lender, making it difficult to work out new mortgage terms, while not properly holding an interest in a loan.

Incorporated by banks in 1995 and still owned by them, MERS is a database that tracks mortgages for its members as they pass among different owners, sometimes as part of securities that bundle hundreds or thousands of loans into one package.

In doing so, MERS has dispensed with the long-standing requirement that a lender file papers with a county recorder every time a loan changes hands.

PATH CLEARED FOR FORECLOSURES

“I think it is good that MERS has been validated,” Nevada Bankers Association President William Uffelman said. “The whole thought behind it was bringing loan recording into the 21st century.”

And the industry has argued that MERS cuts administrative costs and makes loans more attractive to investors by making them easier to sell or trade. This, in turn, is supposed to draw more money into the mortgage market.

But homeowners who are struggling with mortgage payments or have defaulted have found they could not face the actual lender when MERS was involved.

As a result, its legal standing to carry out a foreclosure has faced federal and state court challenges in dozens of jurisdictions.

In Nevada, attorney Jacob Hafter said, who argued the case for homeowner David Edelstein, “the court has cleared a path to begin foreclosing in a mass effort.”

Hafter said he has several other MERS-related cases that he considered stronger but have now been cast in doubt.

“I think the court basically took the (Edelstein) case to say they are not going to let homeowners get out of paying on their mortgages on a technicality,” he said.

Under Nevada law, a home loan is split into a promissory note, the actual loan and a deed of trust that functions as the security for repayment. The lender must hold both the note and the deed to carry out a foreclosure.

However, a lender that is a MERS member will assign control of the deed to MERS, making it an agent that is legally called a beneficiary.

MERS keeps that status, able to act on a lender’s behalf, no matter how many times a loan changes hands.

AFFIRMATION OF MERS

Hafter had argued that once a loan has different note and deed holders, it is permanently flawed and precludes foreclosure.

But the court concluded that returning the deed to the lender that holds the note fixes the defect, which is what happened in Edelstein’s case.

“Because nothing in Nevada law prohibits MERS’ actions, we reject Edelstein’s argument,” the court wrote.

MERS spokeswoman Janis Smith, in a statement, said: “There is no stronger affirmation of MERS’ role in housing than a unanimous decision concluding that MERS is the proper beneficiary and affirms MERS agency relationship to the note holder.”

Underscoring the split over how to deal with MERS, U.S. Bankruptcy Court Judge Linda Riegle issued a ruling in Las Vegas in 2009 that it could not represent lenders unless it could produce a note. However, this applied only to homeowners in bankruptcy.

Contact reporter Tim O’Reiley at toreiley@reviewjournal.com or 702-387-5290.

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Survived The Financial Crisis And All I Got Was This Lousy Civil Lawsuit

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Piggybankblog posted on 10/02/12

Piggybankblog posted picture.

Cross linked with huffingtonpost.com

Thing One: A Little Late, A Little Short: I know revenge is a dish best served cold, but this is getting ridiculous.

New York Attorney General Eric Schneiderman last night sued Bear Stearns, now a unit of JPMorgan Chase, accusing it of stuffing mortgage bonds full of toxic garbage and then selling those bonds to investors knowing they were garbage. This suit was filed more than five years after the alleged fraud occurred and more than four years after Bear Stearns collapsed beneath the weight of the subprime garbage in its warehouse, requiring a government-encouraged shotgun rescue by JPMorgan. The lawsuit is the culmination of nearly a year’s long work by a task force headed up by Schneiderman to bring charges against big players in the financial crisis.

So what sort of fruit has all this time and effort borne? Not a whole lot. We got a few more dumb Wall Street emails to laugh about. And this is, as Ben Hallman of The Huffington Post points out, the first suit of its kind, picking on not just one mortgage-backed security, but the firm’s entire MBS operation before the crisis. So that is something. But the allegations are mostly re-hashed and warmed over from other civil suits, notes David Dayen of the Firedoglake blog. That puts the imprimatur of government legitimacy on those other private suits, notes The New York Times, but does make you wonder what the heck Schneiderman’s task force has been doing all these months, if all it had to do was cut and paste from one legal document to another.

The timing of the case seems odd in another way: Apparently Schneiderman didn’t bother to tell the other parties on his task force, including the Justice Department and the Federal Housing Finance Agency’s inspector general, that he was filing the case last night. According to the Wall Street Journal, the plan had been for the three to walk arm-in-arm to a podium today to announce their big case. It’s a minor point, but it makes you wonder what Schneiderman might have been thinking.

Apparently there could be more of these cases on the way, and the WSJ notes that they could be a big legal headache for the banks. But that seems like all they will be: A legal headache, the cost of which will be borne by the shareholders, while nobody goes to jail — no individual is even named in Schneiderman’s civil complaint against Bear Stearns. Not very satisfying justice, and certainly not much of a deterrent to future bad behavior.

Thing Two: QE Awesome For Banks, At Least: Meanwhile, the banking sector continues to be bailed out constantly, this time in the form of the Fed’s latest quantitative easing program. The Financial Times points out that the Fed’s latest effort to buy up mortgage-backed securities is already paying off big time for banks. Unfortunately, the banks aren’t passing any of this profit on to you in the form of lower mortgage rates, the FT notes. The banks claim they’re keeping rates high to fend off a flood of new borrowers, which they just don’t have the capacity to handle. Thus the latest round of QE will probably do little or nothing for consumer spending, according to a Bloomberg survey of investors. But the banks will be fine, so everything’s cool.

Thing Three: ‘Nein Nein Nein’ Plan Is Back: For the past couple of months, at least, markets have been waiting anxiously for Spain to confess to the European Central Bank that it needs a giant bailout. Reuters reports that it appears, finally, that Spain is ready to ask for that bailout, which would involve the ECB buying up Spain’s sovereign debt, joining the Fed in pumping cash into the financial system. Hooray! But wait: As usual, there is a hangup in this awesome plan. Can you guess what it is? We’ll give you a hint. Invaded Poland? Enjoys a good schnitzel now and then? Yes, Germany, which happens to have all of the money in Europe and really doesn’t feel like doling any more out to anybody right now. So we wait. Meanwhile, Bloomberg writes, Spain’s banks may need twice as much money as recent “stress tests” suggested they did. Good times.

Thing Four: Congress Tries To Avoid Cuts It Mandated: One of the biggest problems for the U.S. economy right now is the “fiscal cliff” of tax hikes and spending cuts scheduled to take effect next year, the legacy of Congress’s ridiculous fight over the debt ceiling last year. The New York Times reports that a group of senators are working on trying to come up with a grand bargain for long-term debt reduction that will help us avoid the cliff. No word if this deal includes a payroll-tax-cut extension; if not, then most people are going to see a tax hike next year anyway. And Republicans are still refusing to raise any other taxes, while Democrats are still refusing to budge on doing away with tax cuts for the wealthy. Meanwhile, the House of Representatives continues to gnaw on human skulls or make giant feces sculptures or whatever that august body does. Not much reason for optimism just yet, in other words.

Thing Five: AmEx Customers Soon To Be $85 Million Richer: American Express has agreed to refund $85 million to customers and pay $27.5 million more in penalties and fines, after being accused of violating various consumer-protection laws, including misleading promotions and age discrimination, The New York Times writes. It’s the latest scalp taken by the new Consumer Financial Protection Bureau, which, as we have noted, the financial industry absolutely hates. So it must be doing something right.

Thing Six: Patent Wars: The Samsung Strikes Back: Yesterday was a decent day for Samsung in its apparently never-ending court battle with rival device-maker Apple. First, a judge lifted a temporary ban that had kept Samsung from selling its Galaxy Tab 10.1 in the United States. The ban had been put in place ahead of a trial on a patent suit filed by Apple. Samsung mostly lost in that trial, but a judge decided the loss didn’t apply to this particular device, so the ban was lifted. Meanwhile, Samsung launched a counterattack against Apple, claiming the iPhone 5 violated some of Samsung‘s patents. Ladies and gentlemen, this is your tech sector.

Thing Seven: High-Speed Traders: Stop Us Before We Wreck The Market Again: High-speed traders are apparently just as terrified of themselves as we are of them, the Wall Street Journal writes: “High-frequency trading firms, long resistant to tighter oversight of their businesses, are beginning to change their tune amid a spate of high-profile technology failures that have roiled financial markets.” It will be interesting to see just how far their new-found sobriety extends. How much will they accept in the way of market curbs, which are ultimately profit curbs after all?

Thing Seven And One Half: The Infographic Is Strong In This One: Need a refresher course on the Star Wars saga stretching back to the sad prequels and all the way to the post-Return Of The Jedi mopping-up? Via BuzzFeed, here are a bunch of amazing infographics that sum it all up for you in visual form, suitable for framing.

Now Arriving By Email: If you’d like this newsletter delivered daily to your email inbox, then please just feed your email address to the thin box over on the right side of this page, wedged narrowly between the ad and all the social-media buttons. OR, if you are logged into a HuffPost account, you could simply click on this link and tick the box labeled “7.5 Things” (and any other kind of news alert you’d like to get). Nothing bad will happen to you if you do, unless you consider getting this newsletter delivered daily to your email inbox a bad thing.

Calendar Du Jour:

Economic Data:

All Day: Auto and Truck Sales for September

Corporate Earnings:
Nothing very exciting.

Heard On The Tweets:

@TonyFratto: No reason for anyone to tweet things Schwarzenegger. Tweet other things.

@EddyElfenbein: Greek bonds were up 18.4% in the third quarter. Way ahead of second place Ireland at 7.9%.

@LaMonicaBuzz: Thinking of creating ETF of companies Peyton Manning is spokesman for. $PZZA $DTV $GM, etc. But can ETF have 2000 stocks in it? Good night.

@MattZeitlin: How I’m supposed to get work done on Adorable Puppy Day at IAC is not at all clear

@DannyZuker: Doing a home remodel. My cellar will become a rec room, my guest room will be an office & my bedroom will remain a disappointment chamber.

And you can follow me on Twitter, too: @markgongloff

Piggybankblog posted on 10/02/12:

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Obama Pursuing Leakers Sends Warning to Whistle-Blowers

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Piggybankblog posted on 10/19/12

Cross linked with bloomberg.com

Eric Holder, attorney general under President Barack Obama, has prosecuted more government officials for alleged leaks under the World War I-era Espionage Act than all his predecessors combined, including law-and-order Republicans John Mitchell, Edwin Meese and John Ashcroft.

The indictments of six individuals under that spy law have drawn criticism from those who say the president’s crackdown chills dissent, curtails a free press and betrays Obama’s initial promise to “usher in a new era of open government.”

Earlier: Obama Cabinet Flunks Disclosure Test With 19 in 20 Ignoring Law.

“There’s a problem with prosecutions that don’t distinguish between bad people — people who spy for other governments, people who sell secrets for money — and people who are accused of having conversations and discussions,” said Abbe Lowell, attorney for Stephen J. Kim, an intelligence analyst charged under the Act.

Lowell, the Washington defense lawyer who has counted as his clients the likes of Jack Abramoff, the former Washington lobbyist, and political figures including former presidential candidate John Edwards, said the Obama administration is using the Espionage Act “like a club” against government employees accused of leaks.

Multimedia: Despite Transparency Promise, U.S. Denies More Than 300,000 Information Requests in One Year.

The prosecutions, which Obama and the Justice Department have defended on national security grounds, mean that government officials who speak to the media can face financial and professional ruin as they spend years fighting for their reputations, and, in some cases, their freedom.

‘Sense of Shame’

Kim’s troubles began in September 2009 when Federal Bureau of Investigation agents appeared at the State Department, where he worked as a contract analyst specializing in North Korea. He was questioned about contacts with a reporter about North Korea’s nuclear weapons program. Eleven months later, Kim was indicted by a grand jury on counts of disclosing classified information and making false statements.

“To be accused of doing something against or harmful to U.S. national interest is something I can’t comprehend,” said Kim, 45, who has pleaded not guilty and faces as many as 15 years in jail if convicted. “Your reputation is shot and there is such a sense of shame brought on the family.”

Kim is one of five individuals who have been pursued by Obama’s Justice Department in connection with alleged leaks of classified information to the news media. The Defense Department is pursuing a sixth case against Bradley Manning, the U.S. Army private accused of sending documents to the WikiLeaks website.

New Directive

The Justice Department said that there are established avenues for government employees to follow if they want to report misdeeds. The agency “does not target whistle-blowers in leak cases or any other cases,” Dean Boyd, a department spokesman, said.

“An individual in authorized possession of classified information has no authority or right to unilaterally determine that it should be made public or otherwise disclose it,” he said.

Read more here: Transparency Outsourced as U.S. Hires Vendors for Disclosure Aid

On Oct. 10, Obama issued a policy directive to executive- branch agencies extending whistle-blower protections to national security and intelligence employees, who weren’t included in the Whistleblower Protection Enhancement Act that passed the U.S. House last month and awaits Senate approval.

While the directive seeks to protect those workers from retaliation if they report waste, fraud or abuse through official channels, it “doesn’t include media representatives within the universe of people to whom the whistle-blower can make the disclosure,” said Elizabeth Goitein, co-director of the Brennan Center of Justice’s Liberty and National Security Program. That still gives Obama the option of pursuing prosecutions of intelligence employees who talk to the press, she said.

‘Important Step’

“The directive is definitely an important step in the right direction, but even if it’s faithfully enforced — and that’s an open question — it may not always be enough,” Goitein said. “A whistle-blower’s report could go to the very people who are responsible for the misconduct.”

Lisa O. Monaco, the top Justice Department official in its National Security Division, told lawmakers earlier this year that leaks are damaging to intelligence operations and the country’s national security as a whole.

“Virtually all elements of the intelligence community have suffered severe losses due to leaks,” Monaco said in February testimony in front of the Senate Intelligence Committee.

Romney Criticism

Still, even as the administration pursues its unprecedented crackdown on government leaks it does not condone, the prosecutions have fallen short of the wishes of lawmakers and other national security experts, who point to books and articles that have shed new light on classified operations.

The administration stands accused of anonymously releasing sensitive information to suit its own political purposes. The disclosure of operational details of the raid that led to the death of Osama bin Laden and attempts to disrupt Iran’s nuclear weapons program triggered the announcement in June of a Justice Department probe of those leaks.

That move was criticized by Republican presidential nominee Mitt Romney, who called for an independent investigation.

“Obama appointees, who are accountable to President Obama’s attorney general, should not be responsible for investigating leaks coming from the Obama White House,” Romney said in a speech at national convention of the Veterans of Foreign Wars in July. “Who in the White House betrayed these secrets?”

‘Chilling Message’

Administration officials are far less forgiving of those who conduct unauthorized contacts with the press.

“They want to destroy you personally,” said Thomas Drake, a senior National Security Agency employee prosecuted in 2010 by Obama’s Justice Department under the Espionage Act. The message to government workers seeking to expose waste, fraud and abuse is “see nothing, say nothing, don’t speak out — otherwise we’ll hammer you,” he said.

Drake faced 10 felony counts in connection to an allegation that he shared classified information with a reporter. He was linked to a report in the Baltimore Sun about inefficiencies and cost over-runs in an NSA surveillance program that was later abandoned.

The case against Drake collapsed last year before trial after he agreed to plead guilty to a misdemeanor, and the government dropped the more serious charges that could have sent him to jail for 35 years.

The prosecution was meant to “make me an object lesson and to send the most chilling message,” said Drake, who is adamant that he never handed over any classified information. “I was essentially bankrupted, blacklisted and blackballed. I was turned into damaged goods.”

Security Exception

Cases such as Drake’s indicate that Obama doesn’t “see the world of national security as being part of open government,” said Danielle Brian, executive director of the Project on Government Oversight, a Washington-based federal watchdog group. “To me, that’s the most important part that needs an open government ethos foisted upon it.”

Monaco, who is an assistant attorney general, told lawmakers this year that advances in technology play a role in the uptick in prosecutions. Where investigators used to struggle to track down the origins of leaks, they now are able to check phone records, e-mail trails and even “employee physical access or badging records” to trace disclosures, she said.

Intelligence agencies are required to report any unauthorized disclosures to the Justice Department, Monaco said. From there, the department, along with the reporting agency, decide whether to open an investigation.

Kim’s Story

The South Korea-born Kim emigrated to the U.S. with his parents and sister in 1976. He spoke little English when he arrived and was enrolled in third grade. A naturalized citizen and graduate of Georgetown University’s School of Foreign Service, Kim made a brief stop on Wall Street before heading to Harvard University to earn a Master’s degree in National Security. He then went to Yale, where at age 31, he earned his Ph.D in diplomatic and military history.

“I decided to forgo a lot of other career opportunities to work in the government,” Kim said.

Kim took a role as an analyst on a range of East Asian matters, with a specialty in North Korea. He briefed many high ranking officials, including then-Vice President Dick Cheney.

In June 2009, Kim is alleged to have discussed how North Korea might react to a United Nations resolution condemning its nuclear tests with reporter James Rosen of Fox News, according to a person familiar with the case. The relationship between Kim and Rosen began when the State Department’s press office arranged a briefing at the request of Kim’s superiors.

Allegations

Prosecutors say that when asked about his communications with the press by the FBI in their initial meeting in September 2009, Kim lied about a continued relationship with the reporter. That same day, he was told his State Department contract had been terminated for budget reasons, according to court filings.

The government alleges Kim’s contacts with Rosen included “efforts to conceal his relationship with the reporter and the secretive nature of their communications speaks volumes about the defendant’s knowledge of who was, and who was not, entitled to receive” information.

Kim declined to discuss specifics of his case in the interview in his lawyer’s office in Washington. His efforts to get the charges dismissed were rejected last year by U.S. District Judge Colleen Kollar-Kotelly, who in denying the motions to dismiss said that the alleged leak involved a report with a classification level that “could be expected to cause grave damage to the national security” if disclosed.

Costly Cases

Cases such as Kim’s, which can be drawn out for years as the prosecution and defense teams work with sensitive materials through dozens of filings and status reports can cost upwards of $1 million, according to Jesselyn Radack, a lawyer with the Government Accountability Project who has defended two individuals prosecuted under the law.

Kim said his parents sold their home in South Korea to help pay for his defense. His sister has also pitched in and a former college roommate has created a website to publicize his case and raise funds.

Radack said the Obama administration crackdown is part of an effort to shut down investigations into the workings of the national-security apparatus.

“At first I thought these Espionage Act prosecutions were to curry favor with the national security and intelligence establishments, which saw Obama as weak when he entered office,” Radack said. “It became abundantly clear the more people were indicted, when you read their indictments, that this was a way to create really terrible precedent for ultimately going after journalists.”

Subpoena Fight

The Justice Department disputes the claim that it would use the law to go after journalists. Monaco, in her testimony this year, pointed to department regulations that limit investigators’ access to reporters, even when doing so “makes these investigations more challenging.”

Still, those rules haven’t completely insulated journalists. James Risen, the Pulitzer Prize winning writer for the New York Times, was subpoenaed to testify at the trial of Jeffrey Sterling, a former CIA officer indicted under the law for allegedly disclosing information about Iran’s nuclear program.

Risen and his lawyers have fought the subpoena, arguing in February that the subpoena threatens the role of journalism in serving the public interest.

Espionage Act

The Espionage Act, signed by President Woodrow Wilson in 1917, has until Obama took office been primarily deployed against some of the most damaging double agents in the U.S. history. Those include Aldrich Ames, a Central Intelligence Agency operative convicted in 1994 for spying for Russia, and Robert Hanssen, a former FBI agent convicted in 2001 of similar offenses. Both men are serving life sentences without parole in high-security federal prisons.

The law also prohibits the unlawful disclosure of national defense information to those not entitled to receive it — a provision that defense lawyers say is being abused by Obama’s prosecutors.

“I campaigned for him, contributed to him, voted for him and believed him,” said Radack of Obama. “For someone who pledged to protect and defend whistle-blowers, he certainly has not even remained neutral, he’s affirmatively set us back really, really far.”

Disclosure Provision

The Justice Department has used the disclosure provision to pursue five cases against government officials for allegedly sharing classified information with members of the news media. In 2009, former FBI linguist Shamai Leibowitz was indicted for handing over transcripts of government wiretaps of the Israeli embassy in Washington to a blogger. He pleaded guilty and was sentenced to 20 months in prison.

Obama also continued the George W. Bush administration’s investigation of Drake, the NSA employee.

“It’s important to understand what’s going on in this country — the government has criminalized whistle-blowing,” said Drake, 55, who lost his $155,000-a-year NSA job in 2008. He now works as a wage-grade employee at an Apple store in a Washington suburb to support his family.

The Justice Department also continues to pursue Sterling, the former CIA officer, and John Kiriakou, an intelligence official who wrote a book detailing the illegal use of waterboarding by the CIA. Kiriakou is also accused of disclosing the identity of a CIA analyst to reporters.

Two Scandals

“The two biggest scandals of the Bush administration in terms of constitutional violations was the use of torture, and renditions, and secret surveillance — and the only two people to date who have been charged in connection with those scandals are myself and John Kiriakou,” Drake said. “That should tell you something about how hard the Obama administration is going to protect those programs.”

The Espionage Act charges against Drake were dropped last year, with the defendant accepting a minor penalty for exceeding the authorized use of a computer. The Justice Department prosecutors were excoriated by U.S. District Judge Richard Bennett for the more than two-year delay between the first search of Drake’s home and the indictment, as well as the decision to drop the most serious charges days before the case was scheduled to go to trial.

Judge’s Rebuke

“I find it extraordinary in this case for an individual’s home to be searched in November of 2008, for the government to have no explanation for a two-year delay, not a two and a half year delay, for him to be indicted in April of 2010, and then over a year later, on the eve of the trial, in June of 2011, the government says, whoops, we dropped the whole case,” Bennett said at Drake’s July 2011 sentencing, according to a court transcript.

Manning, the analyst who allegedly disclosed hundreds of thousands of confidential government documents to WikiLeaks, faces court-martial under the espionage law.

The president’s openness pledge is also undermined by a recent Bloomberg News analysis, which showed that 19 of 20 cabinet-level agencies disobeyed the Freedom of Information Act requiring the disclosure of public documents. In all, just eight of the 57 federal agencies met Bloomberg’s FOIA requests for top officials’ travel costs within the 20-day window required by the Act.

The White House disputes the notion that the president hasn’t kept his promise of transparency.

“While creating a more open government requires sustained effort, our continued efforts seek to promote accountability, provide people with useful information and harness the dispersed knowledge of the American people,” White House spokesman Eric Schultz said in an e-mailed statement.

Obama Meeting

In March last year, Obama met with five open-government advocates in the Oval Office. In the session, Brian of the Project on Government Oversight told Obama that the leak prosecutions were undermining his legacy.

“The president shifted in his seat and leaned forward. He said he wanted to engage on this topic because this may be where we have some differences,” Brian wrote in a March 29, 2011 POGO blog post. “He said he doesn’t want to protect the people who leak to the media war plans that could impact the troops.”

Today, Kim rarely sees his South Korean-born wife, who spends time largely in her native country with her parents. Without any security clearances, Kim is restricted to working on non-classified projects for Lawrence Livermore National Laboratory. He said that most of his colleagues have abandoned him, refusing to return phone calls or letting him know that for professional reasons they’d rather he not pick up the phone. The case has left him isolated personally and professionally.

‘Like a Disease’

“I’m like a disease,” Kim said.

Because of preliminary legal wrangling, Kim’s case is unlikely to make it to court before the end of the year, according to a joint status report filed on Aug. 31.

Sitting in his lawyer’s office a few blocks away from the State Department where he once worked, Kim acknowledges that while he’s had bad days in the past 16 months, he has recognized that in the wake of his personal and financial woes, he may be the only person that can keep himself afloat.

“There was one time at home, one time, when I screamed out loud, when I yelled and I cried. The resentment was so deep,” Kim said. “But ever since then I haven’t shed another tear because if I break down, everything breaks down.”

The Kim case is U.S. v. Kim, 10cr00225, U.S. District Court for the District of Columbia (Washington).

To contact the reporters on this story: Phil Mattingly in Washington at pmattingly@bloomberg.netHans Nichols in Washington at hnichols2@bloomberg.net;

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A.G. Schneiderman Sues Credit Suisse For Fraudulent Residential Mortgage-Backed Securities

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Piggybankblog posted on 11/20/12

Cross linked with ag.ny.gov

NEW YORK – Attorney General Eric T. Schneiderman today filed a Martin Act complaint against Credit Suisse Securities (USA) LLC and its affiliates for making fraudulent misrepresentations and omissions to promote the sale of residential mortgage­-backed securities (RMBS) to investors. According to Attorney General Schneiderman’s lawsuit, Credit Suisse deceived investors as to the care with which they evaluated the quality of mortgage loans packaged into residential mortgage-backed securities prior to 2008. RMBS sponsored and underwritten by Credit Suisse in 2006 and 2007 have suffered losses of approximately $11.2 billion.

Attorney General Schneiderman’s complaint is the most recent enforcement action by the Residential Mortgage-Backed Securities Working Group, a state-federal task force created by President Obama earlier this year to investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities. In October, Attorney General Schneiderman filed a Martin Act lawsuit against J.P. Morgan Securities LLC (formerly known as Bear, Stearns & Co. Inc.), JP Morgan Chase Bank, N.A., and EMC Mortgage LLC (formerly known as EMC Mortgage Corporation) for making fraudulent misrepresentations and omissions to promote the sale of residential mortgage-backed securities (RMBS) to investors.

“This lawsuit against Credit Suisse marks another significant step in our efforts to hold financial institutions accountable for the misconduct that led to the worst financial crisis in nearly a century,” said Attorney General Schneiderman. “Our investigations and legal actions demonstrate that there must be one set of rules for all – no matter how big or powerful the institution may be – and that those rules will be enforced vigorously. We need real accountability for the illegal and deceptive conduct in the creation of the housing bubble in order to bring justice for New York’s homeowners and investors.”

According to Attorney General Schneiderman’s complaint, Credit Suisse led its investors to believe that the quality of the loans in its mortgage-backed securities had been carefully evaluated and would be continuously monitored. In fact, as in the case of other RMBS market participants, Credit Suisse did neither. Instead, it systematically failed to adequately evaluate the loans, ignored defects that its limited review did uncover, and kept its investors in the dark about the inadequacy of its review procedures and defects in the loans. The loans in Credit Suisse’s mortgage-backed securities included many that had been made to borrowers who were unable to repay the loans, were very likely to default, and ultimately did default in large numbers.

As explained in the Attorney General’s complaint, filed today in New York State Supreme Court, RMBS were pools of mortgages deposited into trusts. Shares of the RMBS trusts were sold as securities to investors, who were to receive a stream of income from the mortgages packaged in the RMBS. In offering documents and marketing materials, Defendants led investors to believe that they had carefully evaluated—and would continue to monitor—the quality of the loans in the RMBS.

The Attorney General’s lawsuit charges that Credit Suisse failed to abide by its representations that the loans underlying their RMBS were originated in accordance with the applicable underwriting guidelines, i.e., the standards in place to ensure, among other things, that loans were extended to borrowers who demonstrated the willingness and ability to repay. Further, while Defendants claimed that they undertook “due diligence” to ensure that the loans they purchased from originators complied with the relevant guidelines, in reality, the due diligence review process was compromised by, among other things, Defendants’ desire to maintain good relationships with loan originators.

By mid-2012, cumulative losses incurred in RMBS sponsored by Credit Suisse in 2006 and 2007 totaled over $11.2 billion, or approximately 12 percent of total initial balances of approximately $93.8 billion.

The Attorney General seeks investor damages to recoup these losses, as well as other equitable relief.

RMBS Working Group members contributed significantly to this effort. The Federal Housing Finance Agency Inspector General played a key role working with the New York Attorney General’s Office on the investigation, providing investigators and lawyers, the U.S. Securities and Exchange Commission collaborated and assisted with the case, and the Department of Justice provided resources from U.S. Attorney’s offices around the country as well as from the RMBS Coordinating Team.

“Credit Suisse allegedly engaged in a far-reaching scheme to defraud investors, including Fannie Mae and Freddie Mac,” said FHFA Inspector General Steve Linick. “As victims, Fannie Mae and Freddie Mac have sustained significant losses, which to date have been borne by taxpayers. This lawsuit sends the clear message that reckless lending practices will not be tolerated.”

“Today’s filing by our working group partner and my fellow co-chair New York Attorney General Schneiderman, represents another step toward holding accountable those whose actions led to the financial crisis and hurt so many Americans,” said Principal Deputy Assistant Attorney General for the Civil Division Stuart Delery. “This action demonstrates the value and strength of the working group model and was made possible by contributions from a variety of members of the working group, who contributed resources, personnel and expertise to the development of this case.”

“The number and breadth of recent RMBS actions, and the coordination and sharing among enforcement authorities that underlie them, prove that the whole of the RMBS Working Group is greater than the sum of its parts,” said Robert Khuzami, Director of the SEC’s Enforcement Division.

Today’s action is the latest part of Attorney General Schneiderman’s multi-pronged strategy to stem foreclosures, provide relief to struggling homeowners and hold accountable those responsible for the mortgage crisis.

Earlier this year, Attorney General Schneiderman was appointed by President Obama to co-chair the Residential Mortgage-Backed Securities Working Group. This joint investigation brings together the Department of Justice (DOJ), Department of Housing and Urban Development, the Securities and Exchange Commission (SEC), Federal Housing Finance Agency Office of Inspector General (FHFA OIG) and other federal agencies to investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities. It builds upon ongoing state and federal investigations, while also launching new ones.

Deputy Attorney General Virginia Chavez Romano supervised the investigation, which was conducted by Investor Protection Bureau Deputy Chief Thomas Teige Carroll, Senior Enforcement Counsel Harriet Rosen, and Assistant Attorneys General Veronica Montenegro, Christine Stecura and Brian Whitehurst. The Attorney General also received substantial support from the FHFA OIG during the course of the investigation.

A copy of today’s complaint can be found at: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=q0KKrPtMl7CH4ZT6_PLUS_kxoxg==&system=prod

 

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WHY HAVE WALL STREET’S LEADERS ESCAPED PROSECUTION

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Video Of Show Below Article

Piggybankblog posted on 01/22/13

Cross linked with pbs.org

More than four years since the financial crisis, not one senior Wall Street executive has faced criminal prosecution for fraud. Are Wall Street executives “too big to jail”?

In The Untouchables, premiering Jan. 22, 2013, at 10 P.M. on PBS (check local listings), FRONTLINE producer and correspondent Martin Smith investigates why the U.S. Department of Justice (DOJ) has failed to act on credible evidence that Wall Street knowingly packaged and sold toxic mortgage loans to investors, loans that brought the U.S. and world economies to the brink of collapse.

Through interviews with top prosecutors, government officials and industry whistleblowers, FRONTLINE reports allegations that Wall Street bankers ignored pervasive fraud when buying pools of mortgage loans. Tom Leonard, a supervisor who examined the quality of loans for major investment banks like Bear Stearns, said bankers instructed him to disregard clear evidence of fraud. “Fraud was the F-word, or the F-bomb. You didn’t use that word,” says Leonard. “By your terms and my terms, yes, it was fraud. By the [industry's] terms, it was something else.”

Former Sen. Ted Kaufman (D-Del.), who was appointed to fill Joe Biden’s long-held Senate seat when he was sworn in as vice president in January 2009, was determined to see bankers in handcuffs. “I was really upset about what went on on Wall Street that brought about the financial crisis,” Kaufman recalls. “That doesn’t happen if there isn’t something bad going on.”

Yet Kaufman left office in late 2010 frustrated by the lack of criminal prosecutions. Jeff Connaughton, Kaufman’s chief of staff, remains convinced that the DOJ failed to make prosecuting Wall Street a top priority. “You’re telling me that not one banker, not one executive on Wall Street, not one player in this entire financial crisis committed provable fraud?” asks Connaughton. “I mean, I just don’t believe that.”

Smith asks Lanny Breuer, assistant attorney general for the DOJ’s Criminal Division, about his failure to criminally indict Wall Street executives. “I think there was a level of greed, a level of excessive risk taking in this situation that I find abominable and very upsetting,” says Breuer. “But that is not what makes a criminal case.”

Critics, including two high-level sources within Breuer’s own division and former New York Attorney General Eliot Spitzer, disagree. “They have not done what needed to be done,” Spitzer says. “The greater risk is that corrupt behavior that is damaging to our economy, that leads to something as enormously painful as the cataclysm of ’08, goes unaddressed.”

New York Attorney General Eric Schneiderman finally filed a major lawsuit against JPMorgan Chase and Bear Stearns in 2012. It closely mirrors claims first made by private plaintiffs almost two years earlier. Despite strong evidence of fraud, the government again decided not to pursue criminal charges. Meanwhile, banking scandals continue to surface almost weekly.

The Untouchables is written and produced by Martin Smith. Co-producers are Linda Hirsch and Ben Gold. The deputy executive producer of FRONTLINE is Raney Aronson-Rath. The executive producer of FRONTLINE is David Fanning.

FRONTLINE is produced by WGBH Boston and is broadcast nationwide on PBS. Funding for FRONTLINE is provided through the support of PBS viewers and by the Corporation for Public Broadcasting. Major funding for FRONTLINE is provided by The John D. and Catherine T. MacArthur Foundation. Additional funding is provided by the Park Foundation and the FRONTLINE Journalism Fund. FRONTLINE is closed-captioned for deaf and hard-of-hearing viewers by the Media Access Group at WGBH. FRONTLINE is a registered trademark of WGBH Educational Foundation.

Press contact for FRONTLINE: Diane Hebert-Farrell, (617) 300-5366, diane_hebert_farrell@wgbh.org

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January 24th, 2013

The following is from John’s Daily Blog.

Did you watch “The Untouchables” on Frontline the other night?Watch Untouchables by clicking here I watched it! I thought it was great! That is why I found it appropriate to have today’s blog start off with the theme song from the movie “The Untouchables” with Kevin Costner about Al Capone. But you have to fricken love Frontline — right? This is because Frontline might be the only television program out there that has accurately and appropriately covered the issue surrounding what these banks did. I have not seen any other program go after the banks and the United States Justice Department the way Frontline has. This is why I think Frontline is always such a breath of fresh air for us Americans.

I liked the part where the Frontline reporter seemed to really sock it to Lanny Breuer of the United States Justice Department. This is where the Frontline reporter referred Lanny Breuer to a speech that Breuer gave to the New York State Bar Association back on September 12th, 2012. Apparently — in this speech — Lanny Breuer expressed that he was losing sleep because he feared what a lawsuit might result in against a large financial institution.

.(You can forward youtube to 19:28)

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Clearly the speech seemed to reveal that Lanny Breuer might be reluctant to indict a major bank because it might have a negative impact on the economy. That is why the Frontline reporter asked Lanny Breuer if he felt if that was really the job of a prosecutor to worry about anything other than simply pursuing justice. Lanny Breuer does not answer with a simple yes or no. He instead gives a long drawn out response to the question.

Lanny Breuer: “Well I think I am pursuing justice. I think the whole entire responsibility of the department is to pursue justice. But In any given case — I think I and other prosecutors around the country – being responsible — should speak to regulators and should speak to experts. Because if I bring a case against institution A and — as a result of bringing that case — there is some huge economic effect and — if it creates a ripple effect to where suddenly counter parties and other financial intuitions and other companies that had nothing to do with it are affected badly –- it is a factor we need to know and understand.”

For the record — that sounded like a “yes” to me.

The problem is that I don’t really know if Lanny Breuer made the right or wrong moral decision to not prosecute bank executives. This is because his decision seemed to be based on the fact that he feared economic collapse. I just know that it was not the right decision under the laws that have been established by the People of the United States of America. That is why I respect the fact that he is potentially stepping down. — read article

Dear Lanny Breuer and President Obama –

The fact is that We The People of the United States of America have never been a nation that turns a blind eye to justice simply because we fear civil war. That is unless Americans want to be forced to live the rest of their lives knowing that we never really were One Nation under God! That is unless Americans want to be forced to live the rest of their lives knowing that we never really were indivisible! That is unless Americans want to be forced to live the rest of their lives knowing that we never really were a nation for liberty and justice for all!

Therefore – “Give us the courage to do what is right!”

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Lanny Breuer, Justice Department criminal division chief, is stepping down

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Piggybankblog posted on 01/23/13

washingtonpost.com

Lanny A. Breuer is leaving the Justice Department after leading the agency’s efforts to clamp down on public corruption and financial fraud at the nation’s largest banks, according to several people familiar with the matter.

As one of the longest-serving heads of the criminal division, Breuer’s tenure has been filled with controversy and high-profile prosecutions. He was admonished for his role in the agency’s botched attempt to infiltrate weapon-smuggling rings in the operation dubbed Fast and Furious. And he has been accused of being soft on Wall Street for failing to throw senior bank executives behind bars for their role in the financial crisis.

Yet Breuer is widely credited with aggressively going after white-collar crime in the aftermath of the crisis. He also stepped up the division’s involvement in money laundering cases, launching a series of criminal investigations that have resulted in multimillion-dollar settlements.

It is not clear when Breuer intends to leave, nor what he plans to do once he departs, but it is certain that the prosecutor’s days in office are winding down, according to people who were not authorized to speak publicly about the matter.

Officials at the Justice Department, including Breuer, declined to comment for this article.

When Breuer was confirmed as assistant attorney general for the criminal division in April 2009, the agency was tainted by allegations of political interference in prosecutions and unprofessional conduct during the George W. Bush administration. The department continues to be mired in controversy stemming from the Bush years.

During Senate hearings in 2011, Breuer admitted that he failed to alert other Justice Department officials that federal agents had allowed guns to illegally flow into Mexico and onto U.S. streets between 2006 and 2007. The practice, known as “gun walking,” was also a key part of the Obama administration’s Phoenix gun trafficking operation, Fast and Furious.

The operation came under fire when many of the weapons later turned up at crime scenes in Mexico and the United States, including two where a U.S. Border Patrol agent was killed.

Several officials at the Justice Department resigned in connection with the operation, including Jason Weinstein, a deputy assistant attorney general in the criminal division. Breuer later apologized for his inaction, when the tactics first came to his attention. Sen. Charles E. Grassely (R-Iowa) called for his resignation, but Attorney General Eric H. Holder Jr. stood behind Breuer.

 

A former prosecutor in the Manhattan district attorney’s office, Breuer came to the Justice Department well versed in white-collar crime. He has been a driving force behind the prosecution of banks involved in rigging the global interest rate known as Libor. His efforts helped produce a $1.5 billion settlement with UBS AG and led to criminal indictments against two of the bank’s former traders in December.

But Breuer and his team were blasted for not indicting the parent company and more of its executives given the broad scope of problems at UBS.

Critics have also decried Breuer’s routine use of deferred prosecution, which gives the agency the right to go after a company in the future if it fails to comply with the terms of the agreement. They say the use of such tactics amounts to a slap on the wrists of companies that have engaged in egregious behavior. Breuer, however, has argued that the agreements result in greater accountability for corporate wrongdoing.

Breuer made a name for himself as special counsel to President Bill Clinton, whom he represented in the 1998 impeachment hearings and the Whitewater investigation.

Prior to his appointment at the Justice Department, Breuer worked at the Washington office of the Covington & Burling law firm, alongside Holder. While there, Breuer defended former Clinton national security adviser Samuel R. “Sandy” Berger, who was being investigated for tampering with presidential documents at the National Archives. He also represented baseball pitcher Roger Clemens in proceedings before House Committee on Oversight and Government Reform about the use of steroids.

John Wright responds in his daily blog dated on 01/24/13

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Holder: Big Banks’ Clout “Has an Inhibiting Impact” on Prosecutions

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Piggybankblog posted on 03/06/13

Cross linked with pbs.org

Attorney General Eric Holder said that the Justice Department had considered the economic fallout that could result from prosecuting major banks for their role in the financial crisis, in Senate testimony on Tuesday.

Holder’s comments underscored remarks his deputy, Lanny Breuer, gave in an interview for FRONTLINE’s film The Untouchables that raised concerns among some in government that the Justice Department hasn’t been sufficiently aggressive in prosecuting major banks for the fiscal crisis.

“I am concerned that the size of some of these institutions becomes so large that it does become difficult to prosecute them,” Holder told the Senate Judiciary Committee. “When we are hit with indications that if you do prosecute, if you do bring a criminal charge it will have a negative impact on the national economy, perhaps world economy, that is a function of the fact that some of these institutions have become too large. It has an inhibiting impact on our ability to bring resolutions that I think would be more appropriate. That is something that you all need to consider.”

Holder added that he felt the department had been “appropriately aggressive,” in pursuing and bringing cases where it could prove companies or individuals had broken the law. “These are not easy cases to make,” he said. “Things were done wrong, but the question is whether they’re illegal.”

So far, no Wall Street executives have been prosecuted for fraud in connection with the financial crisis.

Breuer’s interview, which you can read in full here, sparked a Jan. 29 letter from Sens. Charles Grassley (R-Iowa) and Sherrod Brown (D-Ohio) asking for more information on how the Justice Department determined which cases to prosecute. It also asked for the names of any outside experts Justice consulted, and what they were paid.

The Justice Department responded (pdf) one month later, defending its record. But the senators said the letter was “aggressively evasive” and didn’t answer their questions.

On Tuesday, Holder told Grassley that the DOJ would “endeavor to answer” the senators’ letter.

Holder’s full testimony is embedded below. (The exchange on financial fraud prosecutions begins around the 2:17:22 mark.)

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Eric Schneiderman Challenges Obama Administration Over Mortgage Investigations

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Piggybankblog posted on 04/24/13

huffingtonpost.com

WASHINGTON — New York Attorney General Eric Schneiderman has privately criticized the Obama administration and the Department of Justice for not aggressively investigating dodgy mortgage deals that helped trigger the financial crisis, according to senators and congressional aides who met with him this month.

New York’s top prosecutor is co-chair of the administration’s year-old Residential Mortgage Backed Securities Working Group, an initiative that President Barack Obama called for in his State of the Union address last year. In a sign of Schneiderman’s importance to the group, the White House seated him behind Michelle Obama during the speech.

Schneiderman, a Democrat who has attempted to investigate Wall Street, expressed his frustrations with the administration earlier this month during private meetings with Democratic senators on Capitol Hill, arguing that he was “naive” when he first entered into the partnership with the Justice Department, lawmakers and their aides said.

Critics of Schneiderman’s collaboration, which came in exchange for his assent to a national mortgage settlement, warned at the time that the attorney general was being played. His recent criticisms of the administration may renew allegations that he, too, has compiled a lackluster enforcement record.

Schneiderman has recently directed his attention to working with lawmakers and outside groups to pressure the administration to toughen its approach. He traveled to Washington for meetings with Sens. Elizabeth Warren (D-Mass.), Carl Levin (D-Mich.), Sherrod Brown (D-Ohio) and Jeff Merkley (D-Ore.), among others, according to people who attended the meetings. The four senators have been among the loudest critics of the Obama administration’s efforts to hold the financial industry accountable for alleged wrongdoing, charging they have not gone far enough.

Examples of criticized settlements include the Justice Department’s decision not to file criminal charges against financial companies accused of manipulating benchmark interest rates, as well as banks alleged to have helped drug cartels launder money through the U.S. financial system. Government panels like the Financial Crisis Inquiry Commission and the Levin-chaired Permanent Subcommittee on Investigations that referred cases for potential prosecution have seen their recommendations cast aside.

Schneiderman excoriated Justice Department officials for their approach in targeting wrongdoing by financial institutions in private meetings with lawmakers.

“He expressed similar frustrations that the public has expressed,” Levin said.

Levin said that Schneiderman argued that the Justice Department lacks the “political will” to forge ahead with prosecutions of high-ranking financial executives and large financial groups.

“There’s been a real lack of going after the top folks, in general,” Levin said. His subcommittee has aggressively probed potential wrongdoing by leading financial institutions, including alleged money laundering at HSBC and mortgage-related misdeeds at Goldman Sachs.

Another senator, who requested anonymity, said of Schneiderman that it’s “very clear he’s extremely frustrated.”

Schneiderman’s behind-the-scenes criticism may sting administration and enforcement officials, who for years have been dogged by allegations that they have been soft on Wall Street.

The White House attempted to rebut those accusations in part by giving Schneiderman a plum role on a unit launched with great fanfare. He was promised aggressive prosecutors and investigators who through enforcement action would put to rest allegations that the Obama administration has been lax on pre-financial crisis misconduct.

The Justice Department has promoted four cases as having been brought thanks to the securitization task force: two separate settlements reached between the Securities and Exchange Commission and JPMorgan Chase and Credit Suisse, and two civil cases Schneiderman has brought in state court against those same banks.

The SEC’s settlements ended investigations that began long before the formation of the securitization task force.

Critics allege the task force has racked up an unimpressive record. In a sign of its decreased standing at the White House, Obama did not mention it in his State of the Union address earlier this year.

“No one is happy with the pace of the task force at all. It’s a travesty,” said Brian Kettenring, a community organizer who runs the advocacy groups Leadership Center for the Common Good and Campaign for a Fair Settlement. “It’s one of the biggest black marks on this administration, in terms of what they promised versus what has happened.”

Michael Bresnick, executive director of the Obama-formed Financial Fraud Enforcement Task Force, an oft-criticized collection of regulators that has spent much of its time targeting low-level mortgage brokers and borrowers, said last month the RMBS group is “actively investigating fraud” related to mortgage securities.

More than 200 people from the working group are currently investigating potential misconduct in mortgage securities, the Justice Department said.

“Many more investigations are ongoing,” Bresnick said.

Part of the administration’s embrace of Schneiderman was guided by his appeal to liberal groups, who view him as the new sheriff of Wall Street and have criticized the administration’s approach to alleged misconduct by big banks.

Schneiderman often describes how he is holding Wall Street accountable during private meetings with key interest groups, participants in the meetings have said. His office has demanded various internal bank documents on activity ranging from alleged attempts to manipulate benchmark interest rates to the pre-financial crisis securitizations of home loans that eventually defaulted.

New York’s top law enforcement officer also has the two pending civil cases against Credit Suisse and JPMorgan Chase for allegedly misleading investors in mortgage bonds. Both banks have disputed the allegations.

Schneiderman relied on the Justice Department to bring those two cases, officials said. The agency and several U.S. Attorney’s Offices combined to interview more than 40 people and provided more than a dozen analysts and attorneys to review documents for Schneiderman’s lawsuits, officials said.

“The sharing of information and expertise has been certainly beyond anything I’ve ever seen or been aware of,” Schneiderman said when he announced his JPMorgan lawsuit in October. “It has enabled us to move forward more quickly and more aggressively than we would have.”

Justice spokeswoman Adora Andy Jenkins said the agency “supplied and continues to supply crucial investigative and litigation support, technological resources, and expertise to these cases.”

In the months after Schneiderman took office in 2011, large financial institutions and their lawyers said they feared him. Now, some have said privately in interviews that they view him as a nuisance, given the dearth of cases he has brought in light of his aggressive requests for documents.

Instead, another New York state regulator who is viewed as a rival, Superintendent of Financial Services Benjamin Lawsky, has emerged as the key Wall Street scourge, earning the enmity of some industry executives for his enforcement activities and willingness to buck federal regulators.

In his most notable case, Lawsky secured $340 million from Standard Chartered, a UK bank, to settle accusations the bank hid key details from regulators involving at least $250 billion in illicit transactions with Iran and potentially violated U.S. sanctions policy.

At the time of the settlement, Levin, the powerful chairman of the Senate’s investigations panel, said that Lawsky and his team “showed that holding a bank accountable for past misconduct doesn’t need to take years of negotiation over the size of the penalty; it simply requires a regulator with backbone to act.”

Members of advocacy groups who have met with Schneiderman have expressed disappointment in his own efforts to hold financial institutions accountable, and question his criticisms of the administration. Those who spoke on the condition of anonymity for fear of jeopardizing their relationships with his office described Schneiderman’s rhetoric as far more aggressive than his investigations.

“Millions of households are still reeling from the mortgage crisis, which continues to be a drag on our economic recovery,” said Schneiderman spokesman Damien LaVera in response.

“The attorney general … is working constructively with the Justice Department … [and] will continue to work on multiple fronts with activists and allies inside and outside the government to find aggressive, creative ways to ensure that struggling homeowners in New York and around the country get the relief they deserve,” LaVera added.

Schneiderman maintains the backing of some liberal groups, in part because of his efforts to convince the White House to fire Edward DeMarco, the government regulator overseeing state-controlled mortgage giants Fannie Mae and Freddie Mac.

Some of these groups have been critical of DeMarco, the acting head of the Federal Housing Finance Agency, for his refusal to allow the mortgage companies to forgive distressed borrowers’ mortgage debt. Earlier this year Schneiderman prepared a memo outlining a potential way in which the White House could replace DeMarco.

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U.S. accuses Bank of America of mortgage-backed securities fraud

 

Piggybankblog posted on 08/06/13

Cross linked with reuters.com

 

(Reuters) – The U.S. government on Tuesday filed two civil lawsuits against Bank of America for what the Justice Department and securities regulators said was a fraud on investors involving $850 million of residential mortgage-backed securities.

The Justice Department and the U.S. Securities and Exchange Commission filed the parallel suits in U.S. District Court in Charlotte, according to the court filings.

The securities date to about January 2008, the government said, putting them just at the beginning of the global financial crisis.

Bank of America responded to the lawsuits with a statement: “These were prime mortgages sold to sophisticated investors who had ample access to the underlying data, and we will demonstrate that.

“The loans in this pool performed better than loans with similar characteristics originated and securitized at the same time by other financial institutions. We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result.”

Bank of America had warned in a securities filing on Thursday about possible new civil charges linked to a sale of one or two mortgage bonds.

The two suits accuse Bank of America of making misleading statements and failing to disclose important facts about the mortgages underlying a securitization named BOAMS 2008-A.

“These misstatements and omissions concerned the quality and safety of the mortgages collateralizing the BOAMS 2008-A securitization, how it originated those mortgages and the likelihood that the ‘prime’ loans would perform as expected,” the Justice Department said in its statement.

A “material number” of mortgages in the pool “failed to materially adhere to Bank of America’s underwriting standards,” the statement said.

Bank of America has announced a series of settlements with investors and the U.S. government, including an $8.5 billion settlement with investors in mortgage-backed securities and a $1.6 billion deal with bond insurer MBIA Inc.

Piggybankblog posted complaint below:

 

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Justice Department Planning To Announce Financial Crisis Charges

 

Piggybankblog posted on 08/21/13

Cross linked with huffingtonpost

 

Aug 21 (Reuters) – U.S. Attorney General Eric Holder is preparing to announce new cases related to the economic meltdown in the coming months as the Justice Department nears decisions on a number of probes involving large financial firms, the Wall Street Journal reported.

“Anybody who’s inflicted damage on our financial markets should not be of the belief that they are out of the woods because of the passage of time,” Holder said in an interview with the Journal on Tuesday.

He declined to discuss specific cases or say when the cases would be announced, the report said, but added that he wouldn’t leave the job before making major charging decisions on cases stemming from the 2008 financial collapse.

There has been widespread speculation that Holder would not serve through the end of the Obama administration.

Holder’s comments come as the U.S. government takes steps to hold companies responsible for breaking the law in financing the housing bubble that led to the financial crisis.
He said earlier this month that the Financial Fraud Enforcement Task Force would continue to take an aggressive approach to combating financial fraud and uncovering abuses in the residential mortgage-backed securities market.

Disclosures this month from some of Wall Street’s biggest financial firms, including JPMorgan Chase & Co and Bank of America Corp, have shown that the federal government is pursuing new prosecutions of possible abuses in the mortgage-backed securities industry.
“These are complex cases that require enormous amounts of effort to put together, but we are at a point – as you’ve seen, I think, recently – where the results of that difficult work is starting to bear fruit,” Holder said in the Journal interview.

Holder declined to answer specific questions about JPMorgan and its Chief Executive Jamie Dimon, the report said.

The bank faces at least a dozen investigations on issues ranging from mortgage bonds sold before the financial crisis to a federal bribery investigation into whether it hired the children of key Chinese official to help it win business.

“No individual, no company is above the law. We don’t investigate companies based on who a CEO is, but we don’t avoid investigating companies based on who the CEO is, either,” Holder told the paper.

 

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