Bank of America Foreclosure Reviews: Whistleblowers Reveal Extensive Borrower Harm and Orchestrated Coverup (Part I – Executive Summary)

On January 7, ten servicers entered into an $8.5 billion settlement with the Office of the Comptroller of the Currency and the Federal Reserve, terminating a foreclosure review process which was set forth in consent orders issued in April 2010. Borrowers who had had foreclosures that were pending or had completed foreclosure sales in 2009 and 2010 could request an investigation by independent reviewers, selected and paid for by the servicers but subject to approval by the OCC.

Some experts argued that the 2009 and 2010 time range was too narrow and excluded many borrowers who had been treated improperly. These professionals also questioned whether the investigators would operate independently and fairly. Nevertheless, the reviews were touted as delivering a measure of justice to abused homeowners, since any found to be have suffered wrongful foreclosures were to receive sizable monetary awards, and smaller payments would be made to those who experienced other forms of abuse. As HUD Secretary Shuan Donovan proclaimed:

For families who suffered much deeper harm — who may have been improperly foreclosed on and lost their homes and could therefore be owed hundreds of thousands of dollars in damages — the settlement preserves their ability to get justice in two key ways.

First, it recognizes that the federal banking regulators have established a process through which these families can receive help by requesting a review of their file. If a borrower can document that they were improperly foreclosed on, they can receive every cent of the compensation they are entitled to through that process.

Second, the agreement preserves the right of homeowners to take their servicer to court. Indeed, if banks or other financial institutions broke the law or treated the families they served unfairly, they should pay the price — and with this settlement they will.

Yet the foreclosure investigation was halted abruptly, with the OCC and the Fed failing to identify any methodology for how the portion of the settlement allotted to cash awards, $3.3 billion, would be distributed to homeowners who might have been harmed in 2009 to 2010, an astonishing lapse that will almost certainly result in small payments being made to large numbers of borrowers, irrespective of whether they deserved vasty more or nothing at all.*

But except for its hamhandedness, this outcome was no surprise to astute observers. The OCC consent orders had been launched in an unsuccessful effort to render the ongoing 50 state attorney general/Federal negotiations moot. Critics described how these orders were regulatory theater, with Georgetown law professor Adam Levitin comparing them to promising in public to spank a child, then taking him indoors and giving him a snuggle. Leaks during the course of the reviews confirmed these concerns, revealing deep-seated conflicts, limited competence among the review firms, half-hearted efforts to reach eligible homeowners, and aggressive efforts by the banks to suppress any findings of harm.

As grim as this sounds, the conduct was worse than the leaks suggested. After extensive debriefing of Bank of America whistleblowers, we found overwhelming evidence that the bank engaged in certain abuses frequently, in some cases pervasively, in its servicing of delinquent mortgages. This is particularly important because Bank of America has been identified in previous settlements as far and away the biggest mortgage miscreant, paying over 40% of last year’s state/federal mortgage settlement among the five biggest servicers.

This settlement, as intended, was yet another significant bailout to predatory servicers. As we will demonstrate over our upcoming series of posts, conservative estimates of damages due to borrowers under the consent order who suffered improper foreclosures from Bank of America exceed $10 billion. That contrasts with the cash portion of the settlement amount for Bank of America of $1.2 billion.** The amount owing for other abusive practices would have increased this total further.

The OCC gave two rationales for shutting down the reviews. The first was that they were costly to Bank of America and other serivcers, potentially diverting funds from borrowers. This argument is spurious. Those expenses were always contemplated as being in addition to compensating borrowers for the considerable damage they suffered. Moreover, as we will demonstrate, the high price tag for undertaking the reviews was due not only to fragmented and poorly documented borrower records and the servicers’ long-standing disregard for legal requirements, but significantly to an inefficient, poorly designed review process. The fees to the major firms engaged to conduct the reviews are so patently out of line that Caroline Maloney, a senior member of the House Financial Services Committee, has launched an inquiry.

Professional service firm clients, particularly ones as powerful as major banks, when faced with such egregious levels of cost overruns, would normally demand significant reductions in the bills from their vendors. Instead, the Fed and the OCC let Bank of America make its cost problem their cost problem.

The second reason given for shutting down the reviews is that the regulators claim few borrowers were harmed by impermissible foreclosure practices. An American Banker article last week quoted Morris Morgan of the OCC, who was overseeing the reviews from the regulators’ side:

“Do I think there were a significant number of people who were foreclosed on where the banks did not have a legal right to foreclose on them? At this point in time I don’t think that was a significant number,” he said. “But I would go further to say a very few number, and you could even argue one of those, is too many.”

This is both disingenuous and as we will demonstrate over our series, patently false. Borrowers could suffer wrongful foreclosures due to predatory or negligent foreclosure practices for reasons well beyond the servicer not having the “legal right to foreclose”. Moreover, the servicers were ordered to look well beyond that issue. The whistleblowers saw ample evidence of abuses of that could and typically did result in the loss of home within the scope of the reviews they performed. Moreover, they also presented evidence of persistent, sometimes pervasive, impermissible conduct at Bank of America which was simply not addressed in the tests or captured in related information gathering, yet clearly fell within the scope of the consent orders. As we will discuss, some of these abuses would likely result in an impermissible foreclosure or serious borrower harm.

Turn the issue around: why would the banks be willing to down the reviews if indeed they were finding so little in the way of damage to borrowers? They would be well served to spend a few billion dollars to be able to say that with a fair and exhaustive process, hardly any borrowers were harmed. If this claim was true, the costs of finishing the reviews still would have been lower than the cost of the settlement plus the expenses of the reviews to date.

The settlement is also a bailout for the “independent” foreclosure reviewer, Promontory Financial Group, which also played this role for Wells Fargo and PNC. Promontory occupies a unique role in Washington, DC. The firm, headed by former Comptroller of the Currency Gene Ludwig, is heavily staffed with former senior and middle level banking and securities regulators. For instance, former OCC chief counsel Julie Williams (who Ludwig hired when he was at the OCC) has just joined Promontory, and her replacement, Amy Friend, came directly from Promontory.

As we will demonstrate in later posts in this series, even making the most generous interpretation possible of the role played by Promontory, Promontory’s review at Bank of America completely omitted significant categories of borrower harm that were explicitly discussed both in the OCC consent order and Promontory’s engagement letter with Bank of America.

Scope of Our Investigation

We interviewed five contract workers at the largest Bank of America site where the foreclosure review work took place, Tampa Bay, Florida. All had worked on the project from relatively early on, and all had considerable knowledge of mortgage and foreclosure processes and documentation, with the least experienced having worked five years as a paralegal in small real estate-focused law firm. The majority had over ten years of relevant experience. Together they performed significant tests on over 1600 borrowers in a “live” mode, and ran preliminary versions of the tests on hundreds of additional borrower files (actual customer records from Bank of America systems, not dummied-up data) in the attenuated start-up phase.

The reviewers also provided comprehensive documentation from some of the major tests designed by Promontory and operated on its CaseTracker software program as well as other documents provided by Bank of America. We provide a brief overview of the various roles in the Tampa Bay and other Bank of America locations at the end of this post, in Appendix I, and a description of the major tests in Appendix II. We have reviewed the information and documents presented by the whistleblowers with recognized legal experts in foreclosures and securitizations, and have also reviewed relevant OCC materials and Bank of America disclosures.

Overview of Findings

The foreclosure reviews showed persistent, widespread efforts by Bank of America to avoid any finding of borrower harm. These efforts were supported and enabled by Promontory. The whistleblowers, all told their role would be to act as investigators and help borrower get compensation they deserved, described the review process as seriously flawed. Yet even with those obstacles, they saw abundant evidence of serious damage to borrowers.

We asked our five whistleblowers to estimate the amount of borrower harm they saw for the borrowers whose cases they reviewed, and what portion of that was serious harm (all reviewers will be described as male irrespective of gender):

Reviewer A: 90% harmed, with 30% to 40% suffering serious harm

Reviewer B: 30% harmed, including instances of serious harm; described multiple instances of serious harm on other tests performed on his borrowers but could not readily quantify

Reviewer C: 67% harmed on his test; like B, saw multiple instances of serious harm in the borrower history not captured on his test as harm; could not readily quantify but specific examples cited during interviews alone exceed 10%

Reviewer D: 95% harmed, with 30% to 40% suffering serious harm

Reviewer E: 100% harmed, with 80% suffering serious harm

This level is consistent with the findings of a never-published GAO report on the foreclosure reviews that the rushed settlement appeared intended to terminate. The GAO review selected a random sample of foreclosure files and found an 11% error rate. The files the reviewers saw came (depending on the reviewer) at least 80% and in most cases 100% from borrower requests for review through the IFR process or an executive request for review. One would expect to see a markedly higher level of serious problems in these files.

As we will describe in detail, these estimates considerably understate the actual harm suffered due to defects in the test design, active efforts to suppress findings of harm, and major gaps in Bank of America records. As one reviewer stated:

I really kind of went into it very naively, I guess, as a lot of us did, that we were actually there to do good and were being welcomed there to do good for people….I mean, I had gone from pretty gung ho to, “Hey, you guys need to knock this crap off. You guys are just – you’re, just, you’re turning this into a sham.”

Note that Bank of America and Promontory are likely to claim, as they did late last year when ProPublica published an article questioning the independence of the foreclosure reviews, that Promontory was doing the reviews and the contractors employed in Tampa Bay and other locations were simply doing document retrieval. In later posts, we will discuss in depth why this claim is ludicrous in light of how the organization was structured, how Bank of America managers interacted with the reviewers, and how the tests were designed and the reviewers were trained.

Overwhelming evidence of widespread, systematic abuses . No interviewee estimated harm as occurring in less than 30% of the files they reviewed; one put serious harm at 80%. The interviewees did not simply describe individual borrower suffering in graphic terms (as one put it, “I saw files that would make your stomach turn.”) Multiple interviewees would describe widespread, sometimes pervasive patterns of impermissible conduct.

The reviews confirm what both servicing experts and foreclosure defense attorneys have seen since the crisis: Bank of America’s servicing standards were poorly designed and thus unable to handle the deluge of troubled borrowers (suspense accounts, modifications, bankruptcy, etc.). In addition, BofA had a low level of competence in their servicing area and, as a result, the problems with their servicing was made worse. For instance, reviewers gave examples of types of behavior where Bank of America practices were clearly contrary to the law, yet the banks’ personnel confidently maintained that they were proper

OCC’s badly flawed review structure compounded by complex, chaotic, and undermanaged implementation by Promontory. By delegating so much of the review process to “independent” firms (many of whom had little or no experience with servicing and foreclosure), the OCC doubled down on the same incompetence and poor standards that Bank of America and the other servicers already had in their servicing departments. Many of the flaws in the review process (compartmentalized reviews, conflicted supervisors, poor senior review for issues or disputes) were mirror images of the problems at the servicer. These problems were made worse by a bizarre management structure and frequent changes to test content and directives.

Concerted efforts to suppress finding of harm. The organizational design, the way the reviewers were managed, the elimination of areas of inquiry, and evidence of records tampering with Bank of America records all point to a multifacted, if not necessarily well orchestrated, program to make sure as much damaging information as possible was not considered or minimized. To give one example: state law issues were eliminated from the in G test, which covered loan modifications (see Appendix II below), reducing it over time from 2200 questions to 500.

Dubious role of Promontory. Promontory was a poor choice to perform the review. It had virtually no internal expertise in serivcing, provided little or no supervision, and, either by design or incompetence, managed to politicize the review process rather than make it independent.

Promontory’s recent accomplishments include telling MF Global’s board that it had “robust enterprise-wide risk management” five months before it failed and finding only $14 million of Standard Chartered wire transfers in a money laundering investigation to be out of compliance, when the bank eventually admitted the amount was $250 billion. That is no typo, that is an over four order of magnitude difference.

Why does Promontory prosper despite such implausible, indeed, embarrassing performances? It’s because financial firms are eager buyers of extreme management-flattering positions that are seldom subjected to scrutiny thanks to Promontory’s roster of former regulators. Indeed, Promontory occupies a position no firm holds in any other heavily regulated space, that of being the dominant shadow regulator. As we will demonstrate in later posts, the claims made by Promotory about the review process as to its independence and completeness are at odds with considerable evidence on the ground.

We will present the evidence supporting each of the findings in successive posts in this series.

Bank of America Foreclosure Review Appendix I by

Bank of America Foreclosure Reviews Appendix II by


* While the OCC maintains that some borrowers may still receive the maximum payment under the foreclosure reviews, $125,000, the abrupt termination of the foreclosure reviews at Bank of America and other banks and the dismissal of trained staff indicate that not further investigation will be made. That, in combination with the efforts we will describe to show how evidence of harm was not considered, minimized, or suppressed, suggest that the only people who might receive that level of payout will be ones that suffered not just egregious but easily identified harm and were also fortunate enough to get through the review process before the settlement was finalized.

** We attribute very little value to the “required other amount of assistance” of $1.6 billion, which Bank of America can satisfy by extremely low cost actions, such as writing off deficiency judgments on foreclosed borrowers. A deficiency judgment occurs when, after a foreclosure, the borrower is still liable for the difference between the amount owed on the mortgage when it exceeds the amount recovered in the foreclosure sale. People who undergo foreclosures are almost always under severe financial stress (we have discussed elsewhere that the incidence of “strategic defaults”, ex on second homes, is greatly exaggerated). Banks historically have not pursued deficiency judgments; the cost of going after the borrower greatly exceeds what they might collect. At best, Bank of America might be able to sell them to debt collectors for a few cents on the dollar.

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  1. Jackrabbit

    Kudos to those who came forward, to Yves for her devotion to what is right, and to all the others that make NC so great.

  2. dolleymadison

    Bless you, Yves. Sending to editor of Charlotte observer – the same one who continues to ignore similiar whistleblower information about the bank who owns his town. As someone both suffered these abuses, and whose career was ruined at this evil enterprise for doing the right thing, I can’t tell you how gratifying it is to see the truth start to come out – not that anyone harmed will be made whole, but at least those of us who continue to fight the good fight will be shored up a bit!

    1. Lambert Strether

      Dolley, great idea. But I would suggest also sending it to any journalistic institutions that compete with the Charlotte Observer, including alternative newspapers and even college newspapers. (We got very good results in the landfill fight up here from a college paper whose editor was committed to actual journalism, as some of them are!)a

      1. dolleymadison

        Not alot of competitition unfortuneately…trying to get law school involved – I know a kid who just got approved to do an independant study on the constitutionality of the non-judicial FC process and Foreclosure Fraud/complicity of Clerk of Courts. Have done alot of research for him…its not just the press – its the courts, lawyers judges…its an uphill battle.

        1. LucyLulu

          In large part, its the way the statutes were drafted in this state, Dolley. There is ample room allowed for abuses and little room for borrowers to seek justice.

  3. Tim

    “We interviewed five contract workers at the largest…”

    Uh oh, now you’ve done it. You can no longer be called a blogger. Now you are a journalist. :-)

    I hereby re-identify this site as the Naked Capitalism News Site from Naked Capitalism web blog.

    First they ingnore you, then they ridicule you, and now they are going to start fighting you and hopefully with a little luck and viral growth you (and all of us) will win. :-)

  4. sierra7

    “Regulatory Capture”
    Thanks for a great article….will go on to read part 2

    The abyss just gets deeper….
    What ever happened to the proberbial, “Bunco Squad”????????

  5. OMF

    Any chance of the raw case files themselves being given to the likes of Anonymous? Mass mailed to financial journalists? Uploaded to the Pirate Bay? Broadcast over Ham Radio?

    Wouldn’t the First Amendment be applicable?

    1. dolleymadison

      Ham Radio… that cracked me up and just about sums up how I feel trying to get folks to listen.

  6. LucyLulu

    Was wondering what you’d been up to. Lambert got us all chomping on the bit with his juicy teaser comment last night. Hopefully this will go viral. Sending along to the editor of my local newspaper, too. (Great idea, Dolley. And I think we may share some local news, I’m in the triad.)

    1. dolleymadison

      You live in the First in Financial F^&$King state too? I’ve been sending Govenor McPope info on this debaucle – AS IF he gives a rats ass…

      1. LucyLulu

        This is a little old, maybe a year or so, but it will depress you if you haven’t heard it before. It’s a Mandelman podcast with an attorney re: foreclosure in NC. He says that assignments don’t mean anything b/c DOT automatically follow the note, and don’t even have to be written down much less recorded, so deeds of trust always pass the minimal required muster. Notes are the only leg to stand on. And the jury is out whether chain of title is required for the note. He gave example that a thief could steal your note and possibly enforce it, verdicts are split on it. Foreclosures were designed to be quick and easy here.

        On the plus side, he said if you lose your home to foreclosure, you can bring equitable suit for damages for fraud. They at least allow that remedy, and potentially replace the new home (and if filed early enough, may be able to stay foreclosure, but even if you hire somebody at $150/hr, is very expensive).

        1. dolleymadison

          Not sure the whole DOT follows note meme is holding up – for the simple fact that they don’t have the Notes either! AND most importantly, only the Beneficiary on the DOT can substitute the Trustee on the DOT – which must be done before Forclosure starts. Its true you do not have to record assignments, but you DO have to show how you obtained the note – at least in the cases I have seen. As one attorney I know said “You just have to give the judge an excuse to follow the law.” Unfortuneately most homeowners don’t even defend or are grossly outgunned. In the files I have seen lately, the FC mill does not even put a COPY of the note in the Notice of Sale – all they have is service of process and Notice of Sale. No note, no proof of default, NOTHING – and they get away with it over and over. Mine never attached anything until MONTHS after filing Notice of Sale and only did so on the day of the final hearing.

          1. Nathanael

            The sort of shenaningan you describe, providing no proof of right to foreclose, fouls the chain of title for the house, of course.

            If that ever happens to any reader, I’d say it’s worth making the house un-saleable by keeping track of the property records and notifying anyone claiming to have “bought” the house that the title is contested. Best to have a locksmith on call to keep changing the locks back, I suppose…

        2. Nathanael

          Deed-of-trust states have weird law — in many ways, the weakest for borrowers. You could be right about deeds of trust, I don’t know much about them (being in a “mortgage” state, I never felt the need to learn).

          Regarding the note: a few things are key:
          (1) The “foreclosing entity” *must* be the holder of the note *before foreclosure*. This may not be true in all states, but I think it is; anything else would create legal chaos.
          (2) This means there must be a chain of assignments done before* foreclosure which leads up to the “foreclosing entity”. If the assignments end in a “blank” endorsement, then the “foreclosing entity” must actually possess the physical note. Doesn’t *sound* hard to get right, but most of the big “lend-and-resell” operations got this wrong. MERS and unsecured computer data don’t count as transfers unless you’re in Minnesota.
          (3) The note must not have been *deliberately destroyed by the holder*. Countrywide employees admitted to deliberately shredding a whole bunch of notes. If you can show that this happened, you have a very strong case that the debt was in fact forgiven by Countrywide.
          (4) Forgery carries its own penalties — even if the “foreclosing entity” is the holder in due course, if they forge documents to press their claim, and you can prove it, you have a case (unclean hands!)

        1. dolleymadison

          Every time I have sent Pooper anythuing he simply forwrds to NCCOB who will buy any cocka mamie story my servicer comes up with – in one “explanation” the servicer sent to NCCOB they contradicted themselves three times in the same letter – and the NCCOB sends me a copy of the sericers letter, saying basically, that the letter proved servicer did nothing wrong!! I really think the servicer could send a hit man to my house to shoot me in the head and post it on you tube and the NCCOB would say – see, they solved the problem! (And The Observer would publish a story about the poor deadbeat homeowner who practiced suicide by servicer)

  7. Lloyd C. Bankster

    So the other day Brian [Moynihan] calls me up in a panic, said that Adam Davidson was threatening to lead with the B of A coverup story on Planet Money.

    Brian said his guy had already tried bribing Adam, not once, not twice, but three times!

    First they offered 100 Wendy’s Free Jr. Frosty coupons, then 200, then 300 (at $1 per 10 coupons), But Adam was standing firm, said no more quid pro quo agreements, no more Frosties in exchange for suppressing major stories of financial fraud.

    Brian asked, what’s happening here, Lloyd, has that f**king cyst with teeth (i.e., Adam Davidson) suddenly found a code of ethics?!? What should I do? Offer him $100?

    I laughed, told him to chill out.

    Here’s what you do, Brian. Have your guy call Adam back, tell him the offer of 300 Wendy’s Free Jr. Frosty coupons still stands, but now you’re willing to throw in a FREE Hot ‘N Juicy Single CheeseBurger with a $1 off coupon for Chili Cheese Fries. Final offer, take it or leave it.

    So about 10 minutes later the phone rings and it’s Brian again, laughing, problem solved, thanking me. Said he owes me dinner at Masa’s next time he’s in the City.

  8. steelhead23

    I hope you focus a bit more on Promontory. In my industry, those scientists who manage data and theory in a thoroughly industry-supporting way are termed biostitutes. They too, tend to do well. We need a similar term for accounting prostitutes. In my view, accounting prostitution is a far worse crime than ordinary prostitution. Accounting prostitution gives one’s clients the smell of a rose. They make the public believe that all is above board – when its not. The purveyors of such “services” should not merely be fired – they should be incarcerated. Let’s destroy them, shall we?

  9. keepon

    …and why don’t we ever see that scene of the FBI in black tee shirts IMPOUNDING the computer systems & hard drives leading guys in suits with their jackets over their wrists, to discreetly conceal the cuffs, to the paddy-wagon?!? Shut them down! Capture the evidence. Lock it/them up!

    Bless you Yves & company for going right up their face and NOT BLINKING! This is sooo way more than about a house!

  10. Gumbo

    Some edits for Appendix 1 (/remove/add/)

    Page 1, Para 4, sentence 2

    then-current version of other tests /for/or/ with actual consumer records in a training environment.

    Page 2

    /They/The/ reviewers interacted with:

    Page 2, last para

    America policies, for instance, by sending /against sending// e-mails, even innocuous ones,

  11. Gumbo

    Some edits for Appendix 2 (/remove/add/)

    Page 1, A Test

    private label securitizations to see that /they/the/ conveyance to the mortgage

  12. briansays

    it should come as no surprise BOA is called out as a specific sponsor of the inaugural on tonites news–even got invited to the white house events its appears

  13. fred

    There is a large literature in sociology, psychology, social psychology showing that people ‘go along to get along’, take their morality and acceptable behaviors from their peers, and are easily guided by self-interest. Zimbardo, and many others, both laboratory and real-world, document all this in detail.

    So you write about ‘people behaving badly’, events in the un-ending stream of events just like that.

    You should be writing about how to change the system so we don’t get these behaviors. And just proposing new regulations isn’t doing that : they can’t be passed because the oligarchy owns Congress and haven’t worked anyway. Can’t possibly work, in fact, because they are a control system for a mechanism, but banks and other regulatees are subsystems within an open, evolving, complex system, for which there are no control system technologies and can never be for very fundamental reasons in mathematics and the basics of reality.

    You all need to study epistemology, and/or read Taleb’s “Antifragile”. “An epistemological stake through the heart of all Progressive visions” (me).

    If you don’t like ‘

    1. Yves Smith Post author

      People I respect and who like Taleb’s earlier work don’t think much of Antifragile.

      You gave me an assignment. I refer you to Barry Ritholtz’s comments policy which I regard as Web standard:

      F: Assignments:

      There are few things that I find more annoying than disingenuous rhetoric. “Why are you ignoring X? You must post on this NOW.” This alerts me to the fact you have a very small willie, and for reasons unrelated to that affliction, you should be ignored.

      Sorry, I do not accept homework assignments. How about you fat lazy bastard get off your big ass and actually do some homework yourself? Then, you can post a clever observation and URL. Perhaps you will stimulate a conversation.

      Of course, you could always start write your own blog; (Warning: This is actually hard work, and you are mostly lazy).

      Worse still are the emails asking for my opinion on this, or would you comment on that. In 94.7% of the cases, I have already covered the subject extensively (this Google company is on to something). My apologies to the remaining 5.3%, but that’s how it goes: The tyranny of the ignorant majority oppressing the informed minority.

      Changing the system is a vastly taller order than any of the assignments that Ritholtz cited as unreasonable to ask of a blogger.

      I suggest you go try to change the system yourself rather than delegate that to me. Or read another blog if you don’t like how I go about things. The Web is a big place. I am sure you can find something more to your liking.

      1. fred

        I do read other blogs. And indeed, you don’t need to take on assignments.

        But you have to deal with the arguments. Your writings are very pro-regulation, Progressive-thinking, at the same time you decry the effects of regulatory actions, failures of people within the regulatory agencies, and you don’t deal with the contradictions.

        You appear to be critiquing “the system”, the status quo, the crony capitalism, but in fact go on supporting the world view that produced a government incestuous with their cronies in the banking industry, for example.

        As for Taleb’s “Antifragile”, yes indeed he got a lot of negative reviews, as the book was designed to do (great section dealing with that). He calls out intellectual charlatans, e.g. economists and regulators. In my opinion, that book will be seen as one of the very influential books of our new century.

        In any case, it seems to me that few of the postings here try to deal with reality : the actual reality of open, evolving, complex systems, not simple mechanical models. That is fine, if you are trying to perform a specialized news gathering and analysis function, e.g. this article.

        But you continue to prescribe courses of action that are exactly what has produced the FUBARed systems we now endure, the world-wide Greater Depression we are entering, and do so based on the frail data and thinking so well critiqued by Taleb.

        You are all smart folks, it would be good for all of us to have you focused on reality rather than your shared Progressive fantasy lands.

        1. cripes

          Naked Capitalism is an outstanding source of news coverage for political economics, rarely found in the press or the web. I recommend to people all the time.

          However, fred has a point; much of our discussion here and in “progressive” (I am beginning to hate all the labels and no longer have one I can comfortably bear) thinking generally are limited to the confines of institutional remedies (mostly not) allowed us by a thoroughly corrupted kleptocracy that is hardening before our eyes into a diseased state of brutal tyranny before it’s inevitable collapse. Much as I am outraged at the lack of foundational law, justice and regulation that is no where to be seen, I am having trouble at this stage believing we will regulate our way out of this. The Eric Schneiderman’s of the world just aren’t going to cut it anymore.

          We may be waiting for a far more thorough cleansing of the social body than past experience, particularity on this continent, has prepared us to comprehend.

          Still, the ability of the kleptocracy to endure, the feebleness of the opposition and malleability of the population, suggests events may be far from favorable to our perspective.

        2. Aquifer

          fred – a rather strange comment, ISTM ….

          There is no contradiction between being pro regulatory and decrying the effects of the regulations we have – they are lousy regulations or not enforced by those who are supposed to enforce them – One can be pro-food and anti junk food at the same time …

          And where do you read the “support for a world view” that produced these travesties?

          Few deal with the “reality of open, evolving complex systems” – as opposed to “simple mechanical models”? Hmmm STM I have seen little else but critique of “simple mechanical models” precisely because they fail to deal with the “open evolving complex systems” that constitute political economies ….

          Please do list the courses of action that have produced the current mess that are “prescribed” here – I am quite curious as to what they are …

          Somehow ISTM that the one engaged in the fantasy as to what is discussed here is yourself, as your description of it bears no resemblance to the reality of it, as far as i can tell …

          So please do enlighten us on how to deal with “reality”, as you see it …

    2. Aquifer

      Hmmm – how to change the system – that should be pretty damn obvious, ISTM – the system was made by men (will follow Yves convention and refer to all as “men” regardless of gender ….) and can be changed by men – so the trick is it find, support, install/elect those who will be our agents in changing that system ….

      The trick is to convince enough folks that their favorite pols currently running the show are indeed schmucks, are screwing them right AND left, and need to be replaced with those who will facilitate the improvement of the lives of “we the people” ….

      That’s where stuff like this blog comes in – we need the proof, all laid out, as to what is being done and who is doing it – i.e. we need to find out exactly what happened and the exact roles the various characters played … Otherwise we wind up with a lot of waving of arms, gnashing of teeth and menacing rhetoric – full of sound and fury, signifying nothing, as some old Brit once said …

      The truth CAN set one free, but only if one uses it – but first ya gotta have it …

      1. Nathanael

        “The trick is to convince enough folks that their favorite pols currently running the show are indeed schmucks,”

        Especially the elected District Attorneys, who could fix a lot of this very quickly.

        But there’s a second step necessary: people have to recognize that *election systems matter*. We have a gerrymandered system of single-member first-past-the-post districts (subject to Duverger’s Law) with a malapportioned Senate.

        Nobody designing a democracy in any year after 1940 would set one up this way. It makes it exceptionally hard for people to be represented, and makes it easy for a minority to keep winning governmental control, with the support of 25% of the population or less.

        Approval voting or range voting for single-member districts. (Party-)proportional representation for councils and legislatures. Then you have a chance of replacing the schmucks in less than 3 decades.

        It’s still not easy, but it makes it a lot easier to turn over the political class for a new one, without war.

        1. Aquifer

          Nat – And who will put such a system in place? If the duopoly wanted such a system, we would have one by now …the answer is the same here – if we want to change it, short of violence, we will have to use the system we have .. and it can be done, we have had the opportunity – we just don’t take it ….

  14. Veri

    This is called, your government acting in the best interests of special interests – very well connected special interests.

    Of which you are not, nor ever where, one of those special interests.

  15. Greg R

    I have to hit the Tip Jar again because NO ONE ELSE IN THIS F’N COUNTRY IS DOING WHAT YVES IS DOING !!!

    1. Jefemt

      Yves: Greg is right…. you, Tiabbi, and Moyers, Black are the few voices in the wilderness. Thank You!! Timely: Frontline on local PBS last night (1/22) covered “The Untouchables”, lack of criminal cases/ charges by DOJ against the mortgage fraud issue(s)from the supply side- securitizations, etc. The incredulous investigative journalist kept asking, “why why why are there ONLY civil cases?” My tongue is sore from the bite, but the cynical self kept shouting: Follow The Money! The crony Kleptocracy/ confederacy of Wall Street lawyers–aided by direction from the Executive branch–their Washington counterparts like Holder and Obama–are billing out well, settling nicely, all on taxpayers dime and Uncle Ben’s helicopter drops. Likely promise in exchange for campaign monies that prosecutions will not issue from the governmint. Imagine if the already-salaried DOJ attorneys took on the cases: maybe no settlement, maybe jail time, and less billable hours in the private sector. The Frontline program had footage of Keating in handcuffs in the 80’s S & L crisis aftermath: where’s Corzine? Different perp, different crimes–the Board of Directors, upper management of these firms should Go To Jail!!
      Ain’ gowanna happin! Barf

  16. LAS

    We kind of knew this was happening, but putting together the evidence is no easy thing.

    Thank you, Yves, for this wonderful work!

  17. Melissa

    This is an outstanding article! You have painted a very clear picture of how these crooks continue to lie, cheat and steal! I’m sick to my stomach after reading this, but determined to continue this fight!

  18. Susan

    Interesting… I shared the link to this article with a friend on facebook in response to his posting about last night’s Frontline documentary, The Untouchables. The accompanying image that came up in the link (I can’t find that graphic here on this page) was an ad for Ameritrade. How did their advertising come to be affiliated with this article? I wonder. Ah, the vagaries of social media. I removed the preview.

  19. roots

    Excellent piece. Thank you for keeping a spotlight on the criminal banksters and their government enablers.

  20. Wshaffer

    Think about this as well. This “settlement” is for 8.5 billion but the homeowners are only going to share 3.3 billion, which will equal about $800 plus each. The remaining 5.2 billion is a “credit” that the banks have agreed to use to modify more homes. The problem with this is the modifications that are being done. In my case I qualified for a modification for almost 5 years but wasn’t granted one until I hired an attorney. When I started this ordeal my home was worth 240K and I owed 171K.. now my home is worth about 120K and I owe 250K. After I complete the 30 year mortgage I still have a 150K balloon payment!! They simply delayed taking my home from me. We are a 4 person family living on a 35k income. I know someone who makes more than 5 times this amount and was single at the time. This person got a Department of Justice Modification out of the blue, they hadn’t even applied for a modification and yet they got 141K reduction in principal and 2% interest rate with slight increases over time. Effectively this person’s modification left them with no more than a $550 a month mortgage payment for the life of the loan. How is this justice or even possible? It doesn’t even make fiscal sense for the bank, or does it? This is criminal and they shouldn’t be allowed to keep any of this settlement money to modify. Any modifications done should be on their own dime. Every dime of that 8.5 billion should go to help the people that were damaged by their wrong doing and asked for an independent foreclosure review, even that isn’t nearly enough. The emotional and financial devastation caused by these major bank’s blatant criminal acts against American homeowners is unimaginable if you haven’t lived it.

  21. pauline

    These banks minnipulated the review ptocess by hiring their own workers to act in the interest of banks and got caught finally. It was their hope that the people who didnt come forward and file s complaint which is because these homeowners were not aware of the program would be foreclosed upon after this process but it looks like their goose is cooked since they got caught and now have to pay everyone that received a foreclosure notice. They denied these people a loan modification by being deceitful. IMO all these illegal foreclosures should be withdrawn.

  22. Lake Worth

    Recall George Anderson, former CEO still there of course? The DUI killing of Florence Cioffi? That was January 2008 and brought a $350 fine despite that he drove away. Welcome to New York.

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