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OCC Makes Patently False Claim That Slap-on-the-Wrist Servicing Penalties Could Hurt Banks

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It’s time we come up with a new handle for the Office of the Controller of the Currency. It is difficult to convey how shameless this regulatory-agency-turned-slut for the banking industry has become. It’s the Stage 4 disease version of where our government is heading at a rapid clip: officials masquerading as serving the public interest when they are uber lobbyists for the pet whims of their supposed charges.

So what do we call the OCC? The Office of Capital Corruption? The Office of Criminal Capitulation? I have no doubt readers will have even better ideas (and don’t be constrained by the acronym).

As we’ve written in some of our posts on the foreclosuregate settlement negotiations, the OCC has engaged in what even those of us at a remove can tell is bureaucratic warfare against the FDIC and the yet to be operational Consumer Financial Protection Bureau. For the OCC to undermine the CFPB is a twofer. First, it helps to beat back meaningful mortgage reform. Second, the CFPB has the potential to hamper the OCC’s real mission, which is to make sure that the banks come first and everyone else pounds sand. It recognizes the need to make the occasional concession to keep the pitchfork crowd at bay, but otherwise it really has no interest in making the banks toe the line. Note that the Treasury and the Fed have pretty much the same worldview, but the OCC is more shameless and bloodyminded about pursuing it.

For instance, it is pretty clear that someone in the officialdom, probably the OCC, painted a target on Elizabeth Warren’s back. As much as we’e been critical of what appear to be some of the steps she has taken, the flip side is that she does not buy the Team Obama modus operandi of coddling the banks and persuading the chump public to go along via a heavy dose of propaganda and Potemkin reforms.

The CFPB and Warren in particular, have been depicted as behind-the-scenes drivers of the 50 state attorney general settlement talks. Given that the yet-to-be-formed agency wasn’t even in the room during the first round of negotiations, that seems like quite a stretch. It appears that what happened is that Tom Miller, in the two nanoseconds when he was talking tough about mortgage abuses, asked the CFPB for some analytical input as to how to think about what level of fines might be appropriate. It’s not clear whether Miller gave the CFPB some grounds for action (as in “if they didn’t settle, we could sue them for X, Y, and Z” which would then give more concrete parameters for thinking of fines, since the banks would never agree to pay more than what they might lose if the cases went to trial) or gave them free rein to formulate the analysis.

So the goal of that exercise was “What’s the most we could possibly argue for as damages?” or alternatively directly, “What’s a reasonable economic argument for a settlement?” The fact that this analysis came up with bigger numbers than the banksters expected has led the industry defenders to try to turn this finding on its head by depicting these pretty petty fines as monstrously big and therefore proof that Warren is a modern day Savonarola. Ironically, we’ve argued the suggested fines of $20 to $30 billion are way too low if you are coming at this from the perspective of harm done.

So look at how Chief Banking Shill, otherwise know as acting comptroller of the currency John Walsh, insists that the banks can’t be asked to pay for anything remotely resembling the damage they’ve done. This by the way, winds up being the reverse of what any respectable economist wold recommend. For markets to function properly, businesses that do damage are not only supposed to pay for any harm they do to their customers, but also to third parties. That’s why polluters are either regulated, or else subject to extra charges so that the cost of their goods reflects the true social cost. Even conservative economists like Harvard’s Greg Mankiw firmly support this notion.

By contrast, what Walsh is effectively recommending in this Financial Times interview is not only letting polluters get away with doing harm, but also effectively subsidizing them. Of course, his responses are carefully coded, so you need to be alert and read between the lines (view the clip here):

Screen shot 2011-04-26 at 3.04.33 AM

You can see the signs of Walsh’s misdirection and/or complicitness:

The claim that robosigning came to light in September of last year. False, it had been coming up repeatedly in court filings for at least two years before that; the bank regulators chose to ignore it until it erupted into a national scandal.

Characterizing forged documents and false affidavits as “mishandling”. The spin on this gets more and more disconnected from reality. These were systematized, industry-wide practices, not occasional innocent screw ups per the persistent bank Big Lie.

Staunchly supporting the fiction that all foreclosures are warranted, and worse, positive. This is a misrepresentation on two levels. Walsh effectively admits what we’ve long been pretty certain was true: that the touted “Foreclosure Task Force” review of servicer practices last fall was garbage in, garbage out exercise. How did they determine whether the foreclosures were warranted? By looking at ONLY the banks’ records. These same records have produced obvious screw ups like people being foreclosed upon who had no mortgage, plus the more pernicious and from what we can tell, not at all uncommon practice of impermissible application of fees, using suspense accounts to increase fees, holding payments to make them late, using force placed insurance, padding or double dipping (charing the same fee to both investors and the borrower), and applying fees so as to produce fee pyramiding. There are numerous cases where these fees have led to charges that have been larger than the mortgage past due amounts. They can easily escalate to thousands of dollars of unwarranted and illegal charges in a six to eight month time frame.

The second canard here is that borrowers that are behind on their mortgage should lose their house. In every other type of creditor relationship, when the borrower gets in trouble, the first question the lender asks is whether they are worth more to him dead than alive. This isn’t charity, it’s a cold blooded financial assessment. A lender will always restructure a loan if he thinks the borrower can realistically stay current on the new, lower payment amount and it looks more profitable than liquidating the loan.

The reason, as we’ve stressed again and again that banks aren’t modifying mortgages (and remember, the servicers only do the work of restructuring, they don’t eat the cost of the writedown) is the they have terrible incentives. They make money foreclosing and they’ve automated it so it’s profitable to them; they need the proceeds from foreclosures to reimburse themselves for money they’ve advanced to investors; they aren’t set up to do mods, and have no interest in setting up new infrastructure; and if they did enough mods, they’d have to write down second mortgages they own, which they have no intention of doing. So despite the OCC’s claims to the contrary, the parties that have skin in the game, the homeowners and the investors, would benefit from well screened mods, as would the broader housing market. But Walsh is operating from a bogus Mellonite “liquidate the borrowers” logic. The first three years of the Depression tell you how well that idea worked.

There were also several references to bogus notions like “being overly intrusive into their businesses”, overregulation, and the OCC being concerned that regulations or fines might damage bank safety and soundness.

As we have argued, and analyses by the Bank of England director of financial stability Andrew Haldane support, bank crises destroy so much value that you could appropriate all the big banks and it wouldn’t even begin to pay for the damage done. That alone is a justification for extremely intrusive regulation to make them less destructive. Another way to arrive at the same conclusion is to look at the massive level of subsidies the TBTF banks got before, during, and after the crisis. They are not private sector entities, given the massive, one-sided “heads I get huge bonuses, tails I put a drip feed into your national Treasury” arrangement , yet we allow them to launder that into egregious top executive and “producer” pay packages. Walsh’s presentation is completely backwards, and he has to know better.

And as to the idea that the a $20 to $30 billion penalty might hurt the banks, although I questioned the logic of that fine, this document sets out clearly why this no big deal to the banks in question:

CFPB Settlement Presentation

But there was a final troubling theme in the Walsh presentation. It sounds as if the CFPB has already capitulated. Notice how Walsh says the agency is assuring people that it’s going to stay in its cage and worry about documentation. That’s better than nothing, but far less than American citizens deserve.

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41 comments

  1. attempter

    The OCC is an almost fully rationalized (from the point of view of the criminals) government bureaucracy, meaning that it’s a pure goon for the banks. But as the post says, every other agency isn’t far behind.

    I don’t know why there’s even still an argument over the alleged legitimacy of this government.

    It’s also proof that regulation of rackets cannot work. Otherwise we’d never have passed this way again after the 30s. Does everyone want to keep coming back here forever? Reformism is like the psychology of the remorseful alcoholic.

    That’s why the CFPB can never accomplish anything real. And the collapse of Warren, either because she was always a scam artist or just because she’s woefully ignorant and inept where it comes to the way Washington works (otherwise how could she possibly have thought her quasi-posting to the CFPB would do anything other than lock her away and keep her quiet?), is proof that it’s folly to look to anyone within the system for constructive action.

    We sure could use a modern day Savonarola, but that ain’t coming from the top down, from within the corruption and filth.

    That’s why polluters are either regulated, or else subject to extra charges so that the cost of their goods reflects the true social cost.

    In reality, other kinds of polluters are seldom regulated in theory or practice any better than the banks are. That CAFOs (concentrated animal feeding operations) are allowed to exist at all is something vastly more dangerous than even the banks. These unregulated bioweapons factories will eventually unleash a lethal pandemic. That’s not “maybe will”. They will.

    In another thread a few days ago I mentioned drawing up people’s indictments. We should also prepare the indictments on charges of mass murder for executives and major shareholders of the likes of Smithfield, Tyson, etc. Also for their shills.

  2. bmeisen

    sorry episode, traffic ticketing = national debt/GDP up 40%, loss of millions of jobs, almost complete lack of accountability, servicers incentivized to abuse struggling homeowners, federal policy dedicated to doing anything to restore confidence in the stock market so that mom and dad investors do not turn into the pitchfork gang.

  3. Barbara Roper

    You ask for new names for the OCC. Might I suggest the American Bankers Association?

  4. ambrit

    Friends;
    Since “less than forthright” public servants and “off the books” funds flows are involved, could I suggest that “Controller of the Currency” sounds like an euphemism for “Bag Man?”

  5. Francois T

    Names for the OCC?

    I don’t know; I don’t feel like being polite today.

    Must be old age; makes me real grumpy.

    Anyway…let’s give it a try.

    Goldman-on-the-Potomac?

    Beltway Banking Bureau? (BBB)

    Washington Office of Banking & Lobbying YesMen (WOBLY)

    Supreme Head of iBanks Targeting (SHIT)

    Office of Banksters Servants Companions & Enablers (OBSCENE)

    1. Francois T

      Forgot to say:

      Awesome post Yves.

      Your decoding of Walsh’s grade-AAA bovine fazoo was spot on.

      How much will they give him when he leaves? Much more than Orzag, that is for sure.

    1. Rex

      But we would all feel better if some of the perps actually got prosecuted like they did after the SL scams in the late 80′s.

  6. Tom Crowl

    Sadly, this government in no longer of any use in trying to protect either the individual rights of its citizens or the broader social body itself wherever those may conflict with the wishes of the corporate oligarchy.

    What’s truly tragic… is that this has a lot more to do with ‘convenience’ for the oligarchy than anything else. It was just too much trouble to deal with all these underwater citizens.

    Much easier to just screw ‘em all with a collective solution… waste the hard assets (homes and neighborhoods)… and print up all the money we need to cover the losses of the important people.

    Its really going to be up to us to take this thing back.

  7. DownSouth

    The evolutionary psychologist Jonathan Haidt did an extensive cross-cultural study on morality, and here is what he came up with as a nearly universal definition of morality:

    Moral systems are interlocking sets of values, practices, institutions, and evolved psychological mechanisms that work together to suppress or regulate selfishness and make social life possible.

    Recent studies have shown that punishment is necessary to “suppress or regulate selfishness.”

    For instance, as this study from Hillard Kaplan and Michael Gurven indicates:

    We propose that multi-individual negotiations result in the emergence of social norms that are collectively enforced. We base this proposal on a result obtained by Boyd and Richerson, and treated more recently by Bowles and Gintis, in which cooperation is modeled with punishment. These four researchers found that cooperation can be stable in large groups, if noncoopertors are punished and if those who do not punish noncooperators are also punished.

    Dan M. Kahan came to a similar conclusion in this study:

    Maximum cooperation, then, probably requires that reciprocity dynamics be supplemented with appropriately tailored incentives—-most likely in the form of penalties aimed specifically at persistent free-riders. Although trust and reciprocity elicit cooperation from most players, some coercive mechanism remains necessary for the small population of dedicated free-riders, who continue to hold out in the face of widespread spontaneous cooperation, thereby depressing the contributions made by relatively tolerant reciprocators. In the face of a credible penalty, however, the committed free-riders fall into line.

    What happens, however, when one takes what is near universal morality and turns it on its head? According to David Sloan Wilson, writing in Evolution for Everyone, this is what David Seabury and Ayn Rand did:

    My search for uses of the word “selfish” eventually led me to two books with nearly identical titles: ‘The Art of Selfishness’ by David Seabury, written in 1937, and ‘The Virtue of Selfishness’ by Ayn Rand, written in 1963.

    In both books, Wilson goes on to explain:

    Selfishness has been turned from a win-lose proposition to a win-win proposition…

    The main message of both books is that the conventional virtues are overrated and that the real secret of happiness is to follow one’s own ideals, no matter how strong the opposition.

    [….]

    Despite its philosophical ambitions, I quickly discovered that the structure of ‘The Virtue of Selfishness’ is identical to the homespun wisdom of ‘The Art of Selfishness’. The conventional virtues are shockingly placed in the lose-lose column with a long list of words and phrases: altruism, collective, faith, incomprehensible duty, moral cannibalism, mysticism, sacrifice, self-denial, self-immolation, self-sacrifice, unselfishness. The pursuit of self-interest is placed in the win-win column with another list of words and phrases: cooperation, egoism, honesty, independence, integrity, logic, pride, rational principles, rational self-interest, reason, self-esteem, selfishness. Finally a list of stupidly selfish behaviors joins the conventional virtues in the lose-lose column: animal, blind desires, feeling, hedonism, irrational emotions, looter, mindless brute, moocher, Nietschean egoists, parasites, subhuman creature, urges, and whims.

    [….]

    So far I have provided a dispassionate outsider’s view of polarized belief systems. What is it like to be on the inside looking out? Nathaniel Branden provides a revealing glimpse in his book on the Ayn Rand movement titled ‘Judgment Day’. Branden first read Rand’s novel ‘The Fountainhead’ at the age of fourteen. His older sister was giggling over the sex scenes with her friends, and when they left he picked it up out of curiosity. His life was changed forever. The prose wove a spell over him. As he described it to her later, “My excitement wasn’t just at the stylization of the writing—-your particular way of seeing and re-creating reality, which runs through everything—-it was like being in a stylized universe.” That is a fine description of how a belief system can become more powerful by departing from factual realism.

    [….]

    In short, the Ayn Rand movement had all the intensity of a religious movement. It didn’t matter that there were no gods or afterlife. Salvation by rational choice proved just as intoxicating. It didn’t matter that the texts were fictional and no one was being asked to believe that the characters had existed or the events had taken place. They were better than real because of the way that they were organized perception, providing a shining path toward glory, a golden staircase to face toward the rising sun. Rand’s disciples could pursue their individual goals with a clear conscience because everyone else was going to benefit as well… One member of the early movement was Alan Greenspan, the economist who was later to head the United States Federal Reserve Board. As he put it: “What she did…was to make me think why capitalism is not only efficient and practical, but also moral.”

    Rand called her stealth religion “objectivism.” And as I was watching Walsh in the video, I couldn’t help but come to the conclusion that he is as committed a disciple of this new religion, along with its attendant morality and value system, as Greenspan is.

    1. psychohistorian

      Nice comment to a great posting.

      Too bad this feels so futile to me at this point. I am tired of beating my head against the same wall repeatedly.

      When does the next act of this sick play start? Lets pick up the pace of this meltdown please! Some of us are getting impatient for real change.

        1. Yves Smith Post author

          Oh I like that!

          Also the alternative acronyms by Francois T, those are funny as variants.

      1. Rex

        Psychohistorian said,
        “When does the next act of this sick play start? Lets pick up the pace of this meltdown please! Some of us are getting impatient for real change.”

        I have to admit that I am starting to feel the same way. In fact, lately I find myself often thinking of the punchline from Jerry Clower’s old redneck comedy story – “A Coon Huntin Story”

        http://www.youtube.com/watch?v=-AX9QoFhEhI

        I recommend listening to the whole funny thing, but the punchline is what seems to be appropriate in my mind lately, so I will throw a spoiler and quote, “Just shoot up here amongst us, one of us has to get some relief.”

    2. Francois T

      Great comment supported by this formidable erudition of yours DS.

      Let’s push the discussion further:

      No complex society can survive without a high degree of cooperation. We live in a complex society, therefore…

      Long term cooperation cannot be achieved without corralling selfishness, by punishment if need be.

      What happens when normal, codified mechanisms of punishment fail? Cooperation decreases; the key being how persistent this undesirable state of affairs shall be. The more persistent, less cooperation.

      Since humans need moral justification for what they do, we get the Ayn Rands of the world, glorifying social disease like selfishness, and vilifying healthy behaviors like altruism.

      But she’s just a pretext; it is those who trumpet her philosophy through the money channels that are the true enemies of society. (Let’s not get into sermons about the First Amendment, shall we? Branderburg v. Ohio was a correct decision despite a natural impulsion to punish.)

      Let the natural history of this disease run its course and…where does that leave those of us who are aware of the need for cooperation and refuse to witness the society they live in become the Badlands?

      What are the solutions? How do you deal with this type of enemies of society?

      Must punishment be inflicted in a, shall we say, non-codified manner? History teaches us that this can become mighty unpleasant and chaotic very fast Re: Les Jacobins during La Terreur in France 1789-1791

      Will the voters “throw the bums out” in sufficient numbers so that those who will survive get (at last!!) the message: “Stop sucking to the oligarchs…or else!”?

      Can we trust the glorificators of selfishness (a.k.a. conservatards…not to be confounded with conservatives) to keep pushing so hard as to motivate the voters to expel them with great force?

      Or will it take a Great Recession 2.0 with widespread pain to make people realize how close to the abyss we truly are?

      Maybe we are at the end of the Empire period of this country where turmoil, social strife, political division and miserable economy becomes the norm for the next 50 years?

      One thing is obvious: we can’t continue like that.

      1. DownSouth

        Francois T asks: “What are the solutions? How do you deal with this type of enemies of society?”

        My thoughts are that it must be through some enhanced form of democracy. This will require a new form of government rather than a mere reform of it or a mere supplement to the existing institutions. Apparently Jefferson is the only Founding Father to have expressed regrets towards the end of his life as to how badly he and the other Founders had screwed up.

        The progressive solution that emerged in the first half of the 20th century was a utopian solution in that it enshrined a new kind of elite in the vein of W.E.B. DuBois’ “talented tenth.” The apostles of scientific management, led by Paul Samuelson, argued that a highly trained cadre of experts should be given the necessary power and can be counted on to act with it in “the public interest.” The theologian Reinhold Niebuhr pooh-poohed this idea, branding them “scientist kings.” Hannah Arendt also came to question the premise that “all political questions in the welfare state are ultimately problems of administration, to be handled and decided by experts.” Given the performance of Greenspan, Bernanke, Geithner, Summers and Walsh, I would say that Niebuhr and Arendt have been vindicated.

        Was Niebuhr too pessimistic? I think David Sloan Wilson would answer in the affirmative. “When the only purpose of a belief system is to provide a blueprint for action, any and all aspects of factual reality are fair game,” he asserts. “Scientific theories are not immune. Many scientific theories of the past become weirdly implausible with the passage of time, just like religions. When this happens, they are often revealed as not just wrong but purpose-driven.”

        “If anything,” Wilson continues, “nonreligious belief systems [in this category Wilson singles out not only Rand’s objectivism but also Bernard Mandeville’s and Adam Smith’s reduction of “all this complexity to a simple minimalistic formula such as self-interest or utility maximization”] are a greater cause for concern because they do a better job of masquerading as factual reality.”

        Wilson comes to a conclusion similar to what Niebuhr and Arendt did decades earlier:

        In retrospect, the early social sciences in America are striking for their grandiose expectations, as if full understanding and control of man and nature were just around the corner.

        [….]

        These grandiose expectations were combined with a blind faith in authority, as if scientists, politicians, and the captains of industry could be expected to do what’s right without any oversight.

        But despite it all, Wilson still has high hopes for both religion and science:

        Finally, there is the question of whether a belief system can combine the best of religion and science, enabling people to flourish in sustainable communities while remaining fully committed to factual realism. It is important to realize that this would be a new cultural adaptation, never before seen on the face of the earth. Factual realism has always been the servant of practical realism, showing up when useful and excusing itself otherwise… Only now, in highly differentiated modern societies, has it become important to create a large body of factual knowledge that can be trusted, to solve practical problems at an unprecedented social, spatial, and temporal scale. Fortunately, human moral systems are flexible enough to embody anything that is deemed good and right, even if it demands discipline and self-restraint, as it usually does. The first step is to decide that factual knowledge is a virtue—-sacred, if you like—-and that value systems must treat statements of fact more respectfully in the future than in the past.

  8. phil.hubb

    The OCC, hereinafter referred to as The Office of Crony Capitalism…
    or perhaps more pointedly – The Office of Corrupted Capitalism.

    This is fun. This would make a great nation-wide contest.
    Too bad any hope of finding a crony-corporate sponsor is out of the question.

    America is kind of like an airplane. And we are are so hijacked.

    imo

    1. Rex

      Nice metaphor.

      Remains to be seen if we can be saved on the tarmac or must crash into a Pennsylvania field. I can’t abide the possibility that they can get us to hijackers-screw-us-all land.

  9. rc whalen

    The sad fact is that the top four banks are in such trouble that OCC cannot get any more aggressive. Otherwise we find out how living wills will really work under Dodd-Frank. I predicted NIM compression last summer and now we are headed for more margin crushing and falling revs/earnings. Hit the bid.

    Chris

  10. viking

    I did the whole QWR rodeo with Wells Fargo and the OCC. At the end of the day the OCC told me that ownership of my securitized note was ‘proprietary information’ of Wells Fargo and that they had no authority to force Wells to tell me who the owners were. When I brought up TILA they were explicit in saying it doesn’t apply.

    I submitted reams of info highlighting the lack of transfer into the trust. No interest from OCC in following up.

    There are no financial ‘cops’. The OCC is corrupt to the core. Thank you Yves for highlighting this. Please continue.

    1. leapfrog

      I contacted OCC three times (via e-mail) while I was on the HAMPster wheel. I would cut and paste the exact same complaint each time. Finally, about 4 months after the last complaint I received a scolding letter from the bankster, answering my complaint. The letter is now evidence in my lawsuit. The bankster admitted in writing to behavior it had denied via extensive telephone contact with several employees in the Office of the President, Barbara DeSoer at BOA and also corporate headquarters in NC. I thought I would never ever hear from the OCC, but about 1 year and several months later I received a letter from OCC stating that they had “investigated” my complaint by talking with the bankster and since the bankster said everything was just fine, they had now closed my complaint (without giving me any further chance to respond). Yep, OCC is definitely bought and paid for by the banksters. BOA blew off our QWR, as we knew they would.

    1. DownSouth

      “Pimps” is the word Larry Pinkley uses to describe the corporatists in Lifting the Veil. We’re being pimped, he says.

      And since the pimps seem to be the ones with the least redeeming qualities in the sex business, that seems the most appropriate metaphor.

      1. Yves Smith Post author

        I did think about this before using the word slut.

        Pimps are in charge of the whores, exercise some control over them and make money from them. The OCC is the one prostrating itself, so it can’t be a pimp.

        Some whores are in control of their lives (think higher end call girls) and they make money so even calling the OCC a whore or prostitute is charitable and does a disservice generally

        A slut, by contrast, offers her favors wantonly, indiscriminately, and has no assurance of getting anything back (although may get some crumbs). So I think slut is better if not sounding quite as denigrating on a first pass.

        1. Francois T

          “The OCC is the one prostrating itself, so it can’t be a pimp.”

          Hmmm! So, what you’re implying is that if we could remove the Vaseline of respectability, the natural consequences of prostration could hurt much more?

          *evil grin*

  11. Hugh

    OCC? I always thought that stood for the Office of Criminal Complicity, although I have heard it referred to as the Office for Coddling Crooks.

    Seems like every comment I make has the word kleptocracy in it and this will be no exception. The OCC is just a more blatant example of how our political and governmental structures have become enablers, facilitators, and apologists of the looters. When Geithner, Bernanke, and Obama say they “saved” the system, you have to understand the system they saved was the kleptocratic one. Walsh is no different from these. His job is to keep the looting going as long as possible in his corner of the kleptocratic enterprise, and that is what he is doing.

    Again these are not mistaken people. Their actions are not benign. They are the mass criminals of our times. Yes, they are greedy and entitled but primarily, they are evil. They have damaged the lives of hundreds of millions in our country, a rare feat considering there are 308 million of us. They have ruined tens of millions. They are responsible for the deaths of hundreds of thousands. They have stolen from virtually all of us everyday of our working lives. Their wealth needs to be RICO’ed away from them and they need to be sent to prison for their rest of their lives.

    Anyone who votes for any Democrat or any Republican is voting to continue this. Anyone who supports Trojan horse movements like the Tea Party on the right or the equally compromised liberal orgs and elite blogs of the left is saying, “Loot me, loot us!”

  12. Matt

    “So look at how Chief Banking Shill, otherwise know as acting comptroller of the currency John Walsh, insists that the banks can’t be asked to pay for anything remotely resembling the damage they’ve done. ”

    Whattya know, we already *have* a procedure for dealing with entities that owe more in fines than they can possibly pay – it’s called *bankruptcy*…

  13. DownSouth

    Yves said:

    …the more pernicious and from what we can tell, not at all uncommon practice of impermissible application of fees, using suspense accounts to increase fees, holding payments to make them late, using force placed insurance, padding or double dipping (charging the same fee to both investors and the borrower), and applying fees so as to produce fee pyramiding. There are numerous cases where these fees have led to charges that have been larger than the mortgage past due amounts. They can easily escalate to thousands of dollars of unwarranted and illegal charges in a six to eight month time frame.

    John Walsh said (minute 6:12):

    In the case of the Consumer Bureau, they certainly could overreach, but certainly the messages coming out of the Bureau in these early days have been I think ones of reassurance, that they’re going to look at making sure the documents are well understood and that consumers understand their credit card obligations, their mortgage documents and that sort of thing. It’s really impossible for the industry to have any meaningful concerns with better documenting the transactions and that sort of thing.

    Besides the obnoxious subtext of Walsh’s comment—-that the little people are too stupid to understand the transactions appearing on their credit card or morgate statments, that most of the problems are caused by this failure of the little people to understand, and thus the solution is one of “educating” the little people on how to understand a statement—-hasn’t one of the main problems been that, as the pyramiding of fees Yves speaks of progresses, that people aren’t notified of the fees upon fees until sometimes months later? It seems like I remember reading something like that happening.

    1. Yves Smith Post author

      Yes, on mortgages, the majority of customers (may be vast majority, hard to know for certain) either pay via coupon or get a monthly mailing with their contractual amount due on it. Many don’t find out they are deemed to owe serious additional amounts until their servicer contacts them or they get their first foreclosure notice which is typically many moons after a missed or late payment (and as indicated, many borrowers have NO idea a payment was deemed late, they mistakenly assume the lack of notice of a late charge the next month means no late charge was assessed).

      And it takes a considerable effort by a lawyer to get the bank to produce its tally of fees and charges, and even then, they are typically very difficult to decipher.

  14. Ben Franklin

    I like “Office of Criminal Complicity” quite a bit,
    but I’d also like to place “Organized (Financial) Crime
    Commission” in nomination as well.

    1. Bad Uhura

      He’s a stooge, like John Dugan. They all have air conditioned woodgrain. You combine that prestige and paranoia with our mobilizing police state and you have a miserable, ugly set of possibilities for the working stiffs. If you think our courts have no problem allowing liars to push fraud in their affidavits – imagine what they *could* do when it comes time to lock up the “troublemakers”.

  15. Max

    It’s a little hard to comprehend your harsh opinions concerning banks when you have a 1/3 page add for Capital One bank (also known as Capital Scum) adorning your otherwise enjoyable site.

    Please refrain from criticism if your willing to profit from their sleazy business tactics.

    1. Francois T

      ‘scuse me Sir, but…where the hell do you see a big ad on this site?

      Don’t you use Ad Block like every surfer with a modicum of self-respect?

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