The more people look at the abruptly-arranged settlement of the OCC/Fed foreclosure reviews, the more they realize something does not smell right.
Elijah Cummings and Elizabeth Warren have started an investigation of the settlement:
Today, Senator Elizabeth Warren (D-MA) and Rep. Elijah E. Cummings (D-MD) sent a letter to Federal Reserve Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry seeking documents relating to their recent settlement with mortgage servicers that ended the Independent Foreclosure Review (IFR) process.
“We believe that public confidence in the settlement – the confidence necessary to speed recovery of the housing markets – will exist only if the OCC and the Federal Reserve provide additional transparency into the process used and information gathered during the Independent Foreclosure Review process,” wrote Warren and Cummings. “It is critical that the OCC and the Federal Reserve disclose additional information about the scope of the harms found to establish confidence in the sufficiency and integrity of the settlement.”…
The Members requested documents and information including:
• The results of all IFR performance reviews by the Federal Reserve or the OCC, including all documents reviewing the performance of each of the independent contractors that conducted reviews of borrower files under the terms of the consent orders issued in April 2011;
• All documents compiled by the Federal Reserve or the OCC indicating the total amount of settlement funds paid to each independent contractor; and
• The total number of reviews of borrower files initiated by each of the independent contractors, and the number of borrower files in which unsafe or unsound practices were found.
Some people in a position to know believe that this inquiry was prompted in part by our series, as well as the work done by ProPublica and the Huffington Post.
The language of the letter requesting documentation leaves me a bit concerned about whether people in power truly recognize what went on and what is going on within these banks. There’s a level of passive aggressiveness you have to deal with in officialdom rhetoric, because there’s a veneer of politeness that assumes good faith. This is a problem, because what happened in this situation is obvious bad faith collusion from regulators, banks, and consulting firms stocked with corrupt ex-regulators. Yet, Warren and Cummings are pretending otherwise.
For instance, the letter says its objective is to restore confidence in the settlement. Huh? Who cares about “confidence in the settlement” or for that matter “confidence in the housing markets”? The objective was to do justice for homeowners. Since when does the need for “confidence” in a process that was suspect from its very outset trump the contractual and legal protection of citizens? Since when does the need for “confidence” in the markets trump the rule of law? Well, since the Geithner Doctrine, but is that policy going to be institutionalized? Hopefully, this rhetoric is simply a way of keeping options open, and Warren and Cummings understand the depths of the depravity and intend to do something about it.
The pretense of good faith helps the bad guys. For instance, the official position of the OCC is that hardly anyone was harmed. Do you think in your wildest dreams the OCC will reverse their official position? Do you think the consultants like Promontory and Deloitte are going to divulge the lower-level information that points to harm? Promontory didn’t do the granular tests (A-G) at Bank of America, and allowed Bank of America two opportunities to argue with the findings of the surprisingly independent temps they paid for. The audit notes showed that Promonotory consistently accepted Bank of America’s self-serving views. If you ask Promontory, they’ll insist nothing bad happened either in the reviews or at the servicers who were their clients.
Merely having tea and cookies talks with the OCC, Deloitte, and Promontory is an invitation to have them trot out new, improved spin. The only way to get at the truth is to demand that Promontory hand over all their files on CaseTracker and to invite some of the whistleblowers in to look at files they worked on to make sure they weren’t scrubbed. I hope Cummings and Warren recognize that this is the only path to actually dealing with the multiple overlapping public policy problems here. We no longer have time for the pretense of good faith.
Aside from Cummings and Warren, Maxine Waters, ranking member of the House Financial Services Committee, wrote to Bernanke and to Thomas Curry, Comptroller of the Currency, asking for an explanation and demanding minimum protections for homeowners.
Another bit of fallout may be the sudden demotion of Michael Brosnan, who had been senior deputy comptroller of large banks at the OCC. Note that the foreclosure reviews appear to have taken place in the large bank supervision operation; Morris Morgan, who was in that unit, appears to have been a point person. Some well informed readers think it is likely, but not provable, that the apparent demotion of Brosnan was the result of our series. That’s not as presumptuous as it sounds. Curry became head of the OCC after the hopelessly compromised review process was underway. When reports began leaking out that Bank of America, rather than Promontory, was performing substantial parts of the review, Morgan insisted that the banks were doing only clerical tasks and the substantive work was being performed by the “independent” consultants, which in Bank of America’s case was Promontory. We presented overwhelming evidence, including documents, to the contrary. If I were Curry and I had been lied to by my staff and entered into negotiations being misbriefed on what had taken place on the reviews, I’d want a few heads to roll.
Now admittedly Curry has gone to some lengths to preserve appearances and pretend that Brosnan asked to be assigned to a less responsible post. But this story in American Banker (hat tip Deontos) says the troops aren’t buying it:
The Office of the Comptroller of the Currency unexpectedly announced Wednesday that Michael Brosnan, the senior deputy comptroller of large banks, was leaving his post to become examiner-in-charge of Zions Bank.
The move is both unusual and effectively a demotion, though Comptroller of the Currency Thomas Curry suggested it was a change sought by Brosnan himself.
“Now that we are moving beyond the crisis, I can understand why Mike was interested in moving into a new position,” Curry said in the press release, adding he was “surprised” by the request….
“As is the case with many of you, I’ve been here for most of my life because the roles and family of the agency have made it easy to look forward to each and every day,”Brosnan wrote. “I am now in the unfamiliar and uncomfortable realm where it isn’t fun any longer. I find myself exhausted as it has been extraordinarily difficult to recover a sense of proper balance in our lives.”
Yet several OCC insiders were shocked by the news, and openly doubted whether Brosnan was leaving of his own accord. They pointed to the sudden departure last year of Julie Williams, the agency’s longtime No. 2, who was forced out by Curry.
“My own read is he just got the Julie Williams, which is unthinkable,” said one former OCC official. “He can rankle people but the bottom line is he knows those banking companies. They respect him. He’s a good supervisor and if he’s gone, two thirds of that large-bank team can retire.”
The official said others at the OCC are “all just dumbfounded.”
Another OCC official who had been in contact with Brosnan very recently said he had mentioned nothing about an impending position change.
“I thought it was a hoax,” this official said when they received the e-mail Brosnan sent to staff. “Something dramatic must have happened over there in the last day or two for this to happen this way.”
Now we get to the really funny part of the article. Curry, who did the public a great service by getting rid of the old chief counsel, Julie Williams,* and is trying to change the culture at the OCC, is presented as an ogre:
But a third former OCC official disagreed with the others, saying “this was Mike’s decision.”
“This was not a Julie Williams deal,” the third official said.
Instead, the third official attributed the change to overall morale problems at the OCC since Curry took office in April.
“It’s a sad situation when someone who is as talented as Mike is so frustrated that he decides he has to do this,” the third former official said. “The OCC has lost a great leader, and somebody who would speak up and take a stand.”
First, did you notice the “former OCC official” apparently has no source of intelligence on this other than from Brosnan? And of course Brosnan is going to say this was voluntary. Moreover, if this sudden change was the result of Brosnan being unhappy with the OCC, the usual course of action would be to get a new job, not seek a different post at the agency.
The fact that aggrieved staffers at the OCC are complaining to American Banker is the best news I’ve heard all week. The staff at the OCC should be made to feel miserable after all the financial devastation they’ve enabled. We can only hope that more of these demoralized staffers get the message and decamp. Good riddance.
All in all, the tea leaves here are somewhat opaque. Most savvy people in DC knows that this is a story of greed and malevolence, but they are all too polite and culturally captured to say it outright. Still, some of the better members of Congress are requesting documents and politely suggesting that perhaps stealing hundreds of thousands of houses is a bit tacky. So there’s that. And OCC chief Tom Curry seems to be cleaning house at the OCC, prompting much whining from the horrific staff. I have as much sympathy for the regulators as they have for the people whose homes they allowed to be stolen by their banker friends, which is to say, I’m enjoying their frustration and feel like they deserve fair more of it.
On balance, I’d chalk this up as a win for us. I’d also say, thanks to everyone who donated in our fundraiser last year. This is what you paid for, and we’re just getting started.
*Her replacement, Amy Friend, does come from Promontory and was also at the OCC, but my sources say this is not a cause for alarm. Friend was only briefly in both roles and is considered to be tough.