Salon.com > David Dayen

Turns out much-hyped settlement still allows banks to steal homes

Thu, 02 May 2013 15:08:00 +0000

The absolute least Americans can hope for from a major government settlement with a large industry over well-documented crimes is that the industry wouldn’t, after signing the settlement, just continue to commit the same crimes day after day. After all, following the tobacco industry settlement, cigarette makers did manage to stop advertising to teenagers that their product had no medical side effects.

But new evidence reveals the nation’s largest banks have apparently continued to fabricate documents, rip off customers and illegally kick people out of their homes, even after inking a series of settlements over the same abuses. And the worst part of it all is that the main settlement over foreclosure fraud was so weakly written that it actually allows such criminal conduct to occur, at least up to a certain threshold. Potentially hundreds of thousands of homes could be effectively stolen by the big banks without any sanctions.

The Fed messed with the wrong senator

Mon, 15 Apr 2013 16:43:00 +0000

I have spent the better part of four years trying, with little success, to raise awareness about foreclosure fraud, the largest consumer fraud in the history of the United States. In fact, there’s a whole little band of us writers and activists and foreclosure fighters. We have provided multitudes of evidence about fake documents, forged documents, illegal foreclosures, foreclosures on military members while they served overseas, foreclosures on homes with no mortgages, breaking and entering into the wrong homes, suicides by foreclosure victims, and above all the complete lack of accountability for these crimes and abuses.

Can the Supreme Court hike drug prices?

Fri, 29 Mar 2013 18:14:00 +0000

The Supreme Court oral arguments on marriage equality deserved all the attention they received -- but it's another case heard this week that will affect even more people over the course of their lifetimes. And it could cost Americans millions in prescription drug bills.

The case falls within a sadly predictable continuum for the Roberts Court, which virtually always sides with the corporate litigant over the government or individual. This time, the arguments in FTC v. Actavis revolve around an insidious tactic common to the nation’s largest drug companies, and known as “pay for delay.” As a result of the likely ruling in this case, drug companies will be able to charge consumers as much as five times the potential cost of their products. And both government regulators and consumers will watch helplessly as pharmaceutical companies bribe generic drug makers to retain their exclusive holds on the lifesaving medicines we all inevitably require.

Is JPMorgan a farmer?

Wed, 20 Mar 2013 17:02:00 +0000

Imagine you’re a finance lobbyist and want to move deregulation and other industry-friendly policies through Congress. While you might think the House Financial Services Committee would be the logical place to do it -- since it has jurisdiction over financial issues, naturally -- what if there were a sneaky way to maneuver it through a far less scrutinized committee, so most people would have no idea what you were doing?

This is the story of how the world’s largest banks came to love the House Agriculture Committee.

In Washington, we often witness politicians forgetting the lessons of a year or five years or 10 years ago. It takes some special obliviousness to forget the lessons of Friday. Five days ago, Sen. Carl Levin, D-Mich., delivered a critical report and held an explosive hearing detailing the “London Whale” trades, made by a JPMorgan Chase satellite office in London. As you may have read, these trades turned sour and led to a $6.2 billion loss for the bank in a matter of weeks. More important, JPMorgan misled regulators about the nature of the trades, altered its internal processes to take on more risk, and then hid the losses by improperly mismarking the value on its balance sheet, pretending the shortfall was inconsequential to avoid oversight and present a positive financial picture to investors.

To serve and protect … banks?

Tue, 05 Mar 2013 12:30:00 +0000

Wrapping themselves in the American flag is a popular pastime among our nation's prominent institutions. But is it secretly possible for them to commit crimes against active duty members, and pay no price?

Imagine that you’re serving at a forward operating base in Afghanistan. You’ve been in country nine months, coping with hazardous and punishing conditions, trying to survive and return to your family. Then you get a call from your spouse that they’re about to be evicted from the family home. The sense of anxiety is acute, and so is the feeling of helplessness – you’re thousands of miles away, focused on your mission, and you’re wracked with regret and guilt, unable to protect your family from the tragedy and shame of foreclosure.

This has happened at least 700 times to service members on missions overseas since the beginning of the foreclosure crisis in 2008. And it’s actually illegal; it violates the Servicemembers Civil Relief Act, a statute that carries criminal penalties. The nation’s biggest banks have admitted to the conduct before Congress and in regulatory filings, and they only recently acknowledged that they illegally foreclosed on 10 times as many service members as they previously claimed. Any serious effort to hold banks accountable for routine abuse of homeowners should include prosecutions of this execrable behavior. But the government rolled out settlements years before the true depth of these violations ever began to come to light.

Why I let Wall Street walk

Fri, 01 Mar 2013 15:57:00 +0000

I’ve never seen as relatively unheralded an official as the head of the criminal division at the Justice Department get so many exit interviews in national newspapers. But Assistant Attorney General Lanny Breuer, who’s retiring to spend more time with his family at white-shoe law firms on Wall Street, has been given multiple chances to make a last impression. When you spend nearly four years and fail to prosecute anyone of significance for the financial crisis that caused millions of foreclosures, layoffs and a giant hole in the economy that has still not been papered over, I guess you need your pals in the establishment to help you plead your case.

This interview with the New York Times’ Dealbook (sponsored today by the financial firm Allianz) is no different. As a prelude, he gets a commendation from former Attorney General and current corporate lawyer Michael Mukasey (always good to have the lawyer from the other side of the table, defending those you could have but chose not to prosecute, praising your work). He gets phantom criticism from unnamed members of “the Occupy Wall Street crowd” and “Rolling Stone magazine,” a reference to Matt Taibbi. There’s no easier way to marginalize critics than to refuse to name them.

The recession was her fault

Sun, 24 Feb 2013 12:00:00 +0000

You remember Lynndie England. She was the Army Reserve soldier photographed at the Abu Ghraib prison giving the thumbs-up sign in front of a set of naked detainees. A lower-level reservist, she was among the few at Abu Ghraib who actually served prison time.

No officers who authorized and directed the torture and detainee abuse, either in that prison, at Guantanamo Bay or anywhere around the world, ever faced trial. But Lynndie England became a symbol for the sorry state of the rule of law in America, where a few small “bad apples” get held to account, and the higher-ups who devised and directed the criminal activity get off scot-free.

There’s a Lynndie England for the financial crisis, too.

Meet Lorraine O. Brown, an individual singled out for actual jail time for her role in the massive mortgage document fraud that plagued this nation. Like England, she stands alone among the multitudes of fraudsters, including those at the highest reaches of the financial industry.

Brown was the President of DocX, a company that created and processed mortgage-related documents, first as a stand-alone unit, and later as a subsidiary of the document processing giant Lender Processing Solutions (LPS). And like Lynndie England, Brown committed a series of legitimate crimes. From 2003 until 2009, DocX routinely forged mortgage documents.

How to save the USPS

Mon, 18 Feb 2013 19:00:00 +0000

How bad have things gotten for America’s national mail delivery system? The US Postal Service lost $1.3 billion last quarter, and this was regarded as good news. The venerable agency has been saddled with significant financial problems since a 2006 law forced it to pre-fund 75 years of employee retirement benefits, something no other public agency or private company has to do. This cash crunch (the Postal Service gets no money from the federal government and must survive on the revenues it generates) has led to austerity measures for the nation’s second-largest employer (right behind Wal-Mart). Mass layoffs last year were followed, earlier this month, by the announcement that Saturday deliveries of first-class mail will cease come August.

Wall Street wins again

Wed, 13 Feb 2013 17:26:00 +0000

A year ago, President Obama gestured toward the first lady’s box at the State of the Union address at Eric Schneiderman, the attorney general of New York. Schneiderman had just agreed to co-chair the Residential Mortgage-Backed Securities working group, an initiative between state and federal law enforcement officials and bank regulators, designed to investigate and prosecute fraudulent Wall Street activity that led to both the creation of the housing bubble and its collapse. In exchange, Schneiderman dropped his objections to a settlement over some of the banks’ fraudulent post-crash activity, particularly around fraud in foreclosure processing.

Recent profiles of this event have called last night’s State of the Union the “anniversary” of the formation of the working group. But you can’t really have an anniversary of something that never existed in the first place. There never was a Residential Mortgage-Backed Securities working group, never a so-called task force dedicated to ferreting out Wall Street fraud -- the deceptive origination of mortgage loans, sale of worthless mortgage-backed securities for huge sums, and subsequent unloading of toxic debt to unsuspecting buyers. The working group fails to exist as a tangible entity to this day. What does exist is the same years-old Financial Fraud Enforcement Group that serves as a conduit for press releases about investigative actions already in progress.

Underwater homeowners face a tax time bomb

Wed, 01 Aug 2012 20:00:00 +0000

The letter from Bank of America Home Loans got right to the point. “We are pleased to inform you that we have approved your Home Equity Account for participation in a principal forgiveness program offered as a result of the Department of Justice and State Attorneys General global settlement with major mortgage servicers.” In the letter, which I obtained from an anti-foreclosure activist, Bank of America offered the homeowner full forgiveness of their entire home equity loan balance of over $177,000. But then Paragraph 5 came with an ominous warning: “Please be aware that we are required to report the amount of your cancelled principal debt to the Internal Revenue Service.”

Under current law, a principal reduction like this would be exempted from tax liability. However, that law, the Mortgage Forgiveness Debt Relief Act, expires at the end of the year, and after that, any mortgage debt forgiveness provided to a borrower will count as gross income for tax purposes, potentially costing millions of families several billion dollars. In the above case, the borrower would be required to pay taxes on the entire $177,000 amount forgiven by the bank, as if it were earned income. And that’s money that struggling homeowners simply don’t have.