White House warns banks on foreclosures and the law

Better late than never, but still very much appreciated. The banks listen to little other than an iron fist so hopefully the White House is ready to carry through on their talk.

Federal law enforcement officials are investigating possible criminal violations in connection with the national foreclosure crisis, examining whether financial firms broke federal laws when they filed fraudulent court documents to seize people's homes, according to people familiar with the matter.

The Obama administration's Financial Fraud Enforcement Task Force is in the early stages of an investigation into whether banks and other companies that submitted flawed paperwork in state foreclosure proceedings may also have misled federal housing agencies, which now own or insure a majority of home loans, according to these sources.

The task force, which includes investigators from the Justice Department, Department of Housing and Urban Development and other agencies, is also looking into whether the submission of flawed paperwork during the foreclosure process violated mail or wire fraud laws. Financial fraud cases often involve these statutes.

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Bank of America to resume foreclosures next week

We should expect the other banks to get re-started quickly also, though GMAC is already there.

Meanwhile, GMAC Mortgage, whose procedures helped prompt the controversy when one its executives testified that he had signed 10,000 documents in a month, is also proceeding with foreclosures.

“We announced a temporary suspension of evictions and foreclosure sales in the 23 judicial states several weeks ago so we could commence the appropriate review,” said Gina Proia, a spokeswoman for GMAC. “As cases are being reviewed and, when needed, remediated, the foreclosure process moves forward as appropriate.”

Guy Cecala of Inside Mortgage Finance, an industry publication, said: “This draws a line in the sand that the banks expect this problem will be over in relatively short order and it will be back to business as usual. If Bank of America can do it, certainly the smaller ones will follow suit.”

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Wells Fargo also using robo-signers to foreclose

Wells Fargo contends that unlike everyone else in the industry with robo-signing problems, their internal checks and balances are fine. It's possible, but at this point, it's not convincing. The banks are always very casual with details when it's someone else's money and life on the line.

The San Francisco-based bank said on Tuesday it was reviewing some pending cases, but it has maintained that it has checks and balances designed to prevent serious procedural lapses.

In a sworn deposition on March 9 seen by the FT, Xee Moua, identified in court documents as a vice-president of loan documentation for Wells, said she signed as many as 500 foreclosure-related papers a day on behalf of the bank.

Ms Moua, who was deposed as part of a foreclosure lawsuit in Palm Beach County, Florida, said that the only information she verified was whether her name and title appeared correctly, according to the document.

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Mortgage problems could cost banks billions

It's anyone's guess how much but the consensus now is that it will not be cheap. (One industry analyst says it could be over $80 billion.) The longer it takes the banks to clean up their mess the more expensive it will be for the banks. The Obama administration is not interested in pursuing the banks or helping consumers beyond gentle requests but the state attorney generals are much more serious about this problem. Despite the "blame the buyers" approach by the banks, many see this as a serious legal issue for the banks. Time is money and there is a lot of time ahead before this is cleaned up.

Wall Street initially hoped the banks would do just that but as the political furor grew, a quick end to the crisis was looking less and less likely. On Wednesday, 50 state attorneys general announced they were investigating the practices of the mortgage servicing industry, while Florida’s attorney general subpoenaed the nation’s largest mortgage processor, L.P.S., as part of a broader investigation.

In some cases, officials at mortgage servicers signed hundreds of documents a day with barely a chance to review them — the so-called robo-signers — while doubts have arisen about the veracity of the original documents compiled as part of the foreclosure process.

“I don’t see how it can be cleared up in a short period of time,” said Richard X. Bove, an analyst with Rochdale Securities. “The moratorium won’t last that long but the problem will last at least four or five years, maybe a decade.” In the short term, he said, “it could easily cost $1.5 billion per quarter.”

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Krugman on mortgages: 'The question is whether our economy is governed by any kind of rule of law'

The Professor nails it this time. Straight to the bottom line, and quite a bottom line it is:

[T]he mortgage mess is making nonsense of claims that we have effective contract enforcement — in fact, the question is whether our economy is governed by any kind of rule of law.

And the telling details (my emphasis):

Horror stories have been proliferating, like the case of the Florida man whose home was taken even though he had no mortgage. More significantly, certain players have been ignoring the law. Courts have been approving foreclosures without requiring that mortgage servicers produce appropriate documentation; instead, they have relied on affidavits asserting that the papers are in order. And these affidavits were often produced by “robo-signers,” or low-level employees who had no idea whether their assertions were true.

Now an awful truth is becoming apparent: In many cases, the documentation doesn’t exist. In the frenzy of the bubble, much home lending was undertaken by fly-by-night companies trying to generate as much volume as possible.

So much for the myth of the dark-skinned Other (plus Barney Frank) forcing reluctant banks to make loans to the Great Undeserving. As a consequence of all this, as Krugman says: "[M]any of the foreclosures now taking place are, in fact, illegal."

The response is also a mess. The reaction from Team Forced to Follow the Law — "[T]he Obama administration’s response has been to oppose any action that might upset the banks." Pick a side, sir. Or have you already?

And the reaction from the Right is even worse:

Republicans in Congress are lying low, but conservative commentators like those at The Wall Street Journal’s editorial page have come out dismissing the lack of proper documents as a triviality. In effect, they’re saying that if a bank says it owns your house, we should just take its word. To me, this evokes the days when noblemen felt free to take whatever they wanted, knowing that peasants had no standing in the courts. But then, I suspect that some people regard those as the good old days.

Where's that law and order when you need it? Sorry, not for the small people; only for your Betters, the Barons of the New America. Nice that the Professor picks up on the nobles vs. peasants imagery. It's hardly a metaphor any more.

Ugly, ugly, ugly — enough to make the whole world of Our Betters hide its head in shame. Would that that world felt shame.

Pick a side, sir. Or have you already?

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UBS to ignore failures of former executives

It's as though nothing happened during the collapse. Sure, one can appreciate the bad publicity that it might trigger but who wants to see this either? There is absolutely no way I would want to remain a customer of such an institution and banks like this are all hoping that enough people are too busy to change. If the banks have no interest in pursuing justice and the governments have no interest (or they've already helped make these actions legal) what else can a consumer do besides go elsewhere?

Perhaps good for PR, but bad for everyone else.

UBS sought to brush its disastrous performance during the financial crisis under the carpet yesterday by admitting mistakes but ruling out any legal action against its former bosses.

The bank said that while there were grounds for it to pursue them through the civil courts, it had decided to take no action, in part because court cases would generate negative public relations and prevent the restoration of its "good name".

UBS said: "Experience has shown that such cases last many years, generate high costs, lead to negative international publicity and thus hamper UBS's efforts to restore its good name in the markets in which it operates."

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Congressional report criticizes Bush/Paulson bank bailout

This article fails enormously to address who specifically was in power during this troubled process. In the comments below the article you have the usual bashing of Democrats for being socialist which is amusing since the last time I checked, Bush and Paulson were in charge of this process in 2008. If the Teabaggers want to label Bush and Paulson socialists, that's fine (and indeed warranted) but don't blame Obama, Geithner and the Democrats for a disaster that they inherited from the Republicans. As critical as I may be about Geithner's term, this report is about Paulson. Other than for political purposes, it's not clear why the AP failed to mention that key point.

Unless O'Donnell waved her wand and cast a spell to put Obama in office at this time, this is a Bush/Paulson failure.

The bailed-out mortgage companies hired by the Treasury Department to manage its main program designed to prevent foreclosures probably weren't up to the job, and tapping them may have increased taxpayer losses, a new watchdog report says.

Failed mortgage giants Fannie Mae and Freddie Mac relied heavily on subcontractors to manage a program aimed at lowering borrowers' monthly payments, according to a report Thursday from the Congressional Oversight Panel monitoring the $700 billion financial bailout. The job probably detracted from their efforts to right themselves financially and minimize the size of their bailouts, which total $148 billion and are likely to grow, the report says.

Treasury hired them despite their history of mismanagement, the report adds. It says they have misreported key data and missed important deadlines.

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FDIC preparing lawsuits against failed bank execs

A very good move but please, let's see more and let's see the big names included as well.

The Federal Deposit Insurance Corp. has authorized lawsuits against more than 50 officers and directors of failed banks as the agency aims to recoup more than $1 billion in losses stemming from the credit crisis.

The lawsuits were authorized during closed sessions of the FDIC board and haven't been made public. The agency, which has shuttered 294 lenders since the start of 2008, has held off court action while conducting settlement talks with executives whose actions may have led to bank collapses, Richard Osterman, the FDIC's acting general counsel, said in an interview.

"We're ready to go," Osterman said. "We could walk into court tomorrow and file the lawsuits."

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French rogue trader sentenced to 3 years in jail, fined $7 billion

Jérôme Kerviel, the former trader at Société Générale was found guilty by a judge in France. If only this meant the rest of the bankers who lost billions and trillions in risky gambles were also going to prison. There never seemed to be much doubt about his illegal trading though the decision to lay all of the blame with Kerviel did come as a surprise. The defendant's excuse that he was a victim of the system may have some merit though blaming the system for everything was a bit much.

Equally extreme was the decision to fine Kerviel nearly $7 million, which was the amount lost by the bank during his failed trade. Again, if the courts were consistent on such issues, maybe, but until everyone else is returned the trillions lost during the crisis, it feels like he's being blamed for the banking crisis. The banks have the luxury of their own insider influence in politics that has enabled them to skate through the banking crisis with barely a scratch.

As Bill Clinton reminded us when he defended his Wall Street friends and tore into liberals, the bankers mostly acted within the law. Perhaps. And this is exactly why many are still so upset with this one-sided system that is owned by the big name banks. Where is the justice for the destruction of global wealth? Are we really to believe banks are innocent and the real victims? The Guardian:

The ruling read out in Paris's historic Palais de Justice was eagerly anticipated. But few had predicted how hard the court would come down on Kerviel, the man behind one of history's biggest trading scandals.

Accused of breach of trust, computer abuse and forgery, the 33-year-old was convicted of all three charges and was sentenced to five years' imprisonment, with two years suspended. In an order that prompted an audible gasp from court observers, he was also told to pay damages to Société Générale of €4.9bn (£4.2bn) – the total sum of money his risky betting strategies cost his former employers in January 2008.

It is understood the bank views the granting of damages as a symbolic payment, and may not intend to force its erstwhile employee into a lifetime of unpayable debt. Its lawyer, Jean Veil, said the tough verdict was "moral compensation" for a company which insists it knew nothing of the malpractice. "It has been very clearly shown that Jérôme Kerviel's behaviour, his lies, were so sophisticated that the bank could not suspect what he was doing," he added.

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Banks may hand out bonuses early to avoid taxes

Really, let them sink the next time and start over. This is ridiculous, if it goes forward.

"Bush-era" tax provisions that benefited the wealthy are set to expire at the end of 2010. If Congress doesn't extend the favorable rates through next year, it could make a big difference whether employees at Wall Street behemoths like Goldman Sachs, JPMorgan Chase, Morgan Stanley, Bank of America, Citigroup and the like earn their income by year-end.

Some big banks pay bonuses before year-end, while others delay the holiday gift til early January. However, the sunset of a Bush-era tax break may cause them to award compensation in 2010. "Executives are thinking about deferred compensation choices -- deferring bonuses and income, which they can choose to do," says Greg Rosica, a tax partner at Ernst & Young. "People who have stock options are considering the strategy with that. At companies paying out bonuses, early January vs. December can be a very different tax situation for the recipients."

The Obama administration and most of its Democratic peers in Congress favor an approach that would extend tax cuts for the middle-class, but allow rates to rise for top earners. That would mean any individual earning more than $200,000 a year or any family earning more than $250,000 a year will pay a rate of nearly 40% in 2011, rather than the current 35%.

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Banks bailed out by Treasury not doing well

Yet another sign that the banking crisis is far from over. Because some of the banks have been so reluctant to listen to the mood of the public, there will be a strong reluctance to save them should the situation decline even more.

Banks seeking money from the $700 billion financial bailout faced different standards depending on which agency regulated them, according to a report Monday from the Government Accountability Office. Some questionable banks got bailouts by persuading Treasury officials to overlook their problems. Others were blocked by regulators from making a case to Treasury.

Officials approved bailouts for 66 banks with known problems, the GAO found. Those banks have fared worse than the others in the program. They were twice as likely to miss dividend payments they owed to Treasury, the report says.

The report blasts Treasury for failing to track decisions by regulators about which banks could apply for money and which are strong enough to repay. It says the same problems could plague a new program that will send $30 billion to small banks. The new program aims to boost lending by offering banks government money at very low rates.

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Tories tax their own

Few would have expected such a move by the Conservative government. Perhaps like Obama and his dealings with the left, the UK government is confident that their supporters have nowhere else to go. Well, nowhere except sitting at home at election time. As for the criticism of the bankers, it does appear to be more hot air to win over the middle who are still fuming over the news of the 2010 banker bonus plans. Besides big talk, it's doubtful the bankers will be asked to join the cuts. The Independent:

George Osborne imposed the pain of his spending cuts on the Conservative Party's natural supporters yesterday by announcing that child benefit will be axed for families where one parent pays the 40 per cent tax rate.

In an attempt to reassure the middle classes, the Chancellor's high stakes gamble was coupled with a crackdown on workless families accused of milking the benefit system. Claimants will no longer be able to claim more than £500 a week in benefits – the median income for working families after tax.

In his speech to the Tory party conference in Birmingham, Mr Osborne said his "tough but fair" mantra would also apply to the banks. He warned: "We will not allow money to flow unimpeded out of those banks into huge bonuses, if that means money is not flowing out in credit to the small businesses who did nothing to cause this crash and suffered most in it."

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Swiss government to force local banks to hold extra cash reserves

This is a very smart move by the Swiss government. It's ridiculous that other countries have been too afraid to force local banks to do the same. Heaven forbid the banks are asked to buffer their failures from taxpayers. Heaven forbid politicians stand up to the bank lobbyists.

Global Swiss banks UBS and Credit Suisse must hold capital well in excess of new international standards, a government commission said, to limit risk that a bank failure could drag down the economy.

The new rules may crimp the two banks' ability to compete in the field of investment banking, but Swiss regulators want them to focus more on less risky private banking.

The report from the commission of top regulators, bank executives and other industry representatives published on Monday said the two banks should hold at least 10 percent of risk-weighted assets based on new global standards (Basel III) in form of common equity.

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Report: UK banks may need another bailout next year

Much like in the US, good luck with that. There's very little appetite for helping the bankers after their behavior of continuing to reward themselves without real results. It's unfortunate that in all likelihood the only way to reform the financial industry is another collapse in that industry. The industry who caused the recession has proven itself to be incapable of reform or gratitude.

Many British banks may need another state bailout next year and their borrowing requirements could hit 25 billion pounds ($39.4 billion) a month, the New Economics Foundation (NEF) think tank said on Monday.

The NEF said it had examined Bank of England data and concluded that many UK banks appeared to face a funding cliff, as the NEF published a report on the British banking system.

Royal Bank of Scotland and Lloyds had to be part-nationalized as they ran up huge losses during the credit crisis, and others such as Barclays and HSBC have benefited from cheap credit provided by the central bank.

Quite a few US banks have also benefited greatly from cheap credit. They too have conveniently overlooked and ignored just how valuable that was for their livelihood. Read More......

Is JPMorgan really going to sue US government for WaMu money?

Enough is never enough for Wall Street. Once again they are showing the world why they should never, ever be helped without strings. They're also helping make the case for letting them all go under when the next crisis strikes. JPMorgan was of course not forced into this deal. There were a number of other banks from both the US and abroad who were interested in purchasing WaMu and having immediate access to new clients.

JPMorgan Chase has notified federal regulators that it may seek to recoup the money it used to buy the assets of fallen Washington Mutual, or even more.

The Wall Street bank told the Federal Deposit Insurance in letters that it may seek the money, a person familiar with the situation confirmed Monday.

The person spoke on condition of anonymity because lawsuits are pending between JPMorgan Chase and the FDIC in the WaMu bankruptcy.

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Another banking executive payout?

If you are an HSBC customer, you may want to follow this story. It's not yet clear what the final number will be though it will be large enough to stand out during this recession. Again, why would anyone want to continue supporting such a bank?The Indepedent:

Last Friday, the bank confirmed that Mr Geoghegan would leave next March after it broke with 30 years of tradition and passed him over for the chairmanship.

In a statement, the UK's largest company said Mr Geoghegan would be paid £1.42m, "pursuant to the notice provisions of his service contract". He will also be eligible for a bonus, which will be calculated by the remuneration committee later in the year. Last year, Mr Geoghegan gave his £4m bonus to charity.

However, it emerged over the weekend that Mr Geoghegan will receive multiples of the amount announced by the bank on Friday, when longer-term incentive plans are added into the equation. The final value of the incentive plan is unknown and will depend on HSBC's performance in the next few years, but estimates over the weekend ranged from £20m to £36m.

A spokesman for HSBC yesterday described reports that Mr Geoghegan could eventually pocket £36m as "inaccurate and sensationalist".

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US bank failures reaches 127 for the year

The largest banks in the US are doing fine thanks to TARP bailouts but the rest continue to struggle. If the pace continues, 2010 will be even worse than 2009 for bank failures.

Regulators shut lenders in Florida and Washington amid losses on real-estate loans, pushing the number of U.S. bank failures to 127 for the year.

Haven Trust Bank Florida of Ponte Vedra Beach and Arlington, Washington-based North County Bank were closed, according to statements on the website of the Federal Deposit Insurance Corp., which was named receiver. The failures cost the agency’s deposit-insurance fund $104.7 million.

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Citibank hands out pay raises to executives

Why? Again, because they can get away with it. Let's not even bother rolling out the "so they can keep good talent" argument because that's nonsense. These are the same idiots who got the world into this recession. There can be absolutely no justification for paying bonuses at a time like this. So will anyone decide to take a hard line against this or will the corporatist machinery in Washington roll over, as they tend to do?

The announcement Friday by Citi, which remains weaker than most of the large American banks two years after the meltdown, raised questions among experts on corporate governance.

By paying the raises in company stock, not cash, Citi has decided to follow previously issued guidelines that limited salaries to $500,000 for the top 25 executives at financial institutions still receiving large amounts of federal help.

"The question is do they deserve higher salaries, and are they evading rules to avoid losing talent?" asked Charles Elson, director of the Weinberg Center for corporate governance at the University of Delaware.

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Bailed out banks piling on new bank fees

As always, they get away with it because they're allowed to get away with it. Until Washington decides to get tough with the bankers, we should expect nothing else. The problem is that if the Democrats would (heaven forbid) criticize these fees, the GOP would be there to defend the bank fees. Then they would again accuse the Democrats of being anti-business. At that point the Democrats would then choose to ignore consumers and reach out to someone more business friendly in the hopes that this time, the Republicans might start to play nice. Welcome to Groundhog Day, the Washington edition. CNNMoney:

In August, the Card Act banned a variety of fees -- including certain overdraft and excessive late charges. But one month later, banks are increasing existing fees and finding creative new ways to charge customers more for credit cards, so-called "free" checking accounts and banking services.

Already this year cash-advance fees and balance transfer fees have risen to 4%, up from 3% in July last year, according to a study conducted by the Pew Health Group's Safe Credit Cards Project.

"It's like you've got a sinking boat, where you plug one hole and another one springs up," said Curtis Arnold, founder of CreditRatings.com. "You can shut down one egregious fee, but that doesn't mean other fees aren't just going to start popping up elsewhere."

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Bank of England Governor 'surprised' bank bonuses not being discussed more

How can you argue against Mervyn King on this point? How soon everyone forget that we're in this mess because of high risk taking by the bankers. The high risk trades helped generate the high income bonuses. They also triggered the collapse of the financial sector yet they've hardly been scratched because of cowardly politicians who are terrified of taking on the banks.

King attracted a warm reception from a packed hall in central Manchester when he made clear his own views on bank bonuses.

"I understand the strength of feeling," he said. "I'm surprised it often hasn't been expressed more deeply. I certainly understand that."

King, who has been given new responsibilities for governing the regulation of the financial sector, said Britain's financial systems needed "radical reform" to avoid a repeat of the crisis that put both the economy and union members' livelihoods at risk.

Improved regulation would mean that banks that "get it wrong" in the future "must be allowed to fail", to avoid ordinary depositors or taxpayers paying the price, he said.

He told the TUC conference that most people in the country did not object to others earning more than them – even a lot more – provided they understood why, and saw the contribution the better-paid had made.

Indeed. Precisely what value or contribution have the bankers made? They somehow believe that their modern "financial engineering" provides something well beyond bigger bonus money. It doesn't. It's all about the bonus. Read More......