Savings & Loan Prosecutor Bill Black on Failure of the Mortgage Fraud Settlement

Bill Black on Financial Fraud Investigations

Theresa Riley of checked in with banking fraud expert Bill Black for his take on the ongoing investigation into the U.S. financial crisis. February 6 was the deadline for the multistate foreclosure settlement between state attorneys general and the major banks. If the purported $25 billion deal goes through, it will provide some relief to those who have experienced foreclosure (or are in danger of it) and require banks to overhaul their foreclosure practices.
Theresa Riley: Last week there were many rumors about the types of fraud that will be covered in the multistate foreclosure settlement. Initially there were reports that it would be limited to robo-signing abuses — and then there were reports to the contrary. What is expected to be included in the settlement?

Photo by Robin Holland
William Black:  The newest (pro-release) rumors are that the current draft of the settlement includes some releases for mortgage origination fraud and secondary market fraud, but that those releases are limited. We are not told how limited.
Riley: If the deal goes through as reported, what could this mean for future criminal investigations and reforms?
Black:  The leaks about the proposed deal occurred in conjunction with President Obama’s State of the Union Address and a series of press releases and conferences by Attorney General Holder about a newly created “working group.” That working group is intended to investigate secondary market fraud. There is no comprehensive investigation of the over $1 trillion in mortgage origination fraud. There are no prosecutions of any of the elite bank officers who led, and became wealthy from, the epidemic of mortgage origination fraud. The State AGs do not have the resources to investigate even two of the largest fraudulent lenders.
The major development this past week is that New York Attorney General Schneiderman filed suit, alleging that the Mortgage Electronic Registration System (MERS) is aiding foreclosure fraud and ruining America’s public recordation system for real estate, which conservative economists praised as one of the key reasons America became so prosperous. MERS is enormous and it is fundamentally flawed and dangerous, so this could be a tremendously useful action.

Truth, Lies and Afghanistan

Taliban fighters

How military leaders have let us down

Beaver County Peace Links via Armed Forces Journal

I spent last year in Afghanistan, visiting and talking with U.S. troops and their Afghan partners. My duties with the Army’s Rapid Equipping Force took me into every significant area where our soldiers engage the enemy. Over the course of 12 months, I covered more than 9,000 miles and talked, traveled and patrolled with troops in Kandahar, Kunar, Ghazni, Khost, Paktika, Kunduz, Balkh, Nangarhar and other provinces.

What I saw bore no resemblance to rosy official statements by U.S. military leaders about conditions on the ground.

Entering this deployment, I was sincerely hoping to learn that the claims were true: that conditions in Afghanistan were improving, that the local government and military were progressing toward self-sufficiency. I did not need to witness dramatic improvements to be reassured, but merely hoped to see evidence of positive trends, to see companies or battalions produce even minimal but sustainable progress.

Instead, I witnessed the absence of success on virtually every level.

My arrival in country in late 2010 marked the start of my fourth combat deployment, and my second in Afghanistan. A Regular Army officer in the Armor Branch, I served in Operation Desert Storm, in Afghanistan in 2005-06 and in Iraq in 2008-09. In the middle of my career, I spent eight years in the U.S. Army Reserve and held a number of civilian jobs — among them, legislative correspondent for defense and foreign affairs for Sen. Kay Bailey Hutchison, R-Texas.

As a representative for the Rapid Equipping Force, I set out to talk to our troops about their needs and their circumstances. Along the way, I conducted mounted and dismounted combat patrols, spending time with conventional and Special Forces troops. I interviewed or had conversations with more than 250 soldiers in the field, from the lowest-ranking 19-year-old private to division commanders and staff members at every echelon. I spoke at length with Afghan security officials, Afghan civilians and a few village elders.

I saw the incredible difficulties any military force would have to pacify even a single area of any of those provinces; I heard many stories of how insurgents controlled virtually every piece of land beyond eyeshot of a U.S. or International Security Assistance Force (ISAF) base.

I saw little to no evidence the local governments were able to provide for the basic needs of the people. Some of the Afghan civilians I talked with said the people didn’t want to be connected to a predatory or incapable local government.

From time to time, I observed Afghan Security forces collude with the insurgency.

Continue reading Truth, Lies and Afghanistan

Bank Fraud Settlement Good for Banks, Bad for Economy

Comments on the Mortgage Fraud Settlement

by Bill Barclay

Progressive Democrats of America, Chicago Political Economy Group, DSA
February  9,2012

According to press accounts, there will be a deal between the banks and the state AGs over housing/foreclosures, etc.  A bubble in housing prices (driven by finance) got us into the Lesser Depression and it could get us out.  But I don’t think this deal is it.

The banks are going to fork over $25 billion, plus access to refi by 300,000 homeowners now shut out and perhaps some payments to 750,000 people who lost homes to foreclosure.  This may sound like a lot of money – until you remember the scope of the problem.

The Fed issued a study in Jan 2012 that reported:

(a) 12 million households with negative equity (“underwater”), almost 1/4 of total households with mortgages;

(b) total negative equity of these 12 million is about $700 billion;

(c) 8.6 million of these households were current in their mortgage
payments, accounting for $425 billion of the negative equity;

(d) the remaining 3.6 million households are all at least 30 days delinquent in payments and

(e) 1.4 million of them are in foreclosure – that is on top of the 4 million or so that have lost homes to foreclosure over the past 4 years.

Another way to put this in perspective is to remember that, in current dollars, in 1933 Congress authorized the Home Owners Loan Corporation (HOLC) to issue debt amounting to almost $50 billion that was then used to buy mortgages from lenders, in essence becoming their refinancing lender on about 21% of all 1 – 4 family dwelling units that existed in the 1930s.  (The equivalent number of households today would be about 10 million).

All in all, we have along way to go – and failure to solve the housing/foreclosure mess means it will continue to act as a drag on aggregate demand and getting the economy restarted.

The Coming War with Iran

Iranian missiles for taking out aircraft carriers and other targets

Is GOP Rhetoric Setting the

Stage for an Israeli Attack?

By Tom Hayden
Beaver County Peace Links via

Feb. 7, 2012 – Israel now estimates that Iran’s nuclear program is nine months away from “being able to withstand an Israeli attack,” which happens to be the same timeline as the U.S. presidential election. Meanwhile, a well-connected U.S. Pentagon adviser believes that Israel might give the White House only an hour or two warning before attacking Iran, “just enough to maintain good relations between the countries but not quite enough to allow Washington to prevent the attack.”

These troubling assertions were contained in a recent and authoritative article in The New York Times Magazine about a potential Israel-Iran confrontation. Written by the magazine’s Israeli correspondent Ronen Bergman, who has access to top Israeli leadership, the story reports that Israel believes three key conditions for starting a war may have been met.

First, that Israel can cause serious damage to Iran’s sites and “withstand the inevitable counterattack.” Second, that there is tacit support from the “international community,” particularly the United States, for carrying out an attack. And third, all other possibilities of containing the threat have been exhausted, and it will soon be too late to prevent.

Standing in the way, according to the article, is President Barack Obama, whom the Israelis suspect “has abandoned any aggressive strategy that would ensure the prevention of a nuclear Iran and is merely playing a game of words to appease them.” The same conclusion has been suggested elsewhere.

Continue reading The Coming War with Iran