Category Archives: Banking industry

Bill Black: Which Aspect of the FDIC’s Litigation Failures is the Most Embarrassing and Damaging?

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly posted with New Economic Perspectives

Dave here (always wanted to say that!): I know Yves wrote about this yesterday, but it’s always worth getting Bill Black’s reaction on these regulatory matters – not to mention to further illustrate and amplify the FDIC’s conduct.

On March 11, 2013 the Los Angeles Times published a revealing article by E. Scott Reckard entitled: “In major policy shift, scores of FDIC settlements go unannounced.”

The article’s summary statement captures the theme nicely. “Since the mortgage meltdown, the FDIC has opted to settle cases while helping banks avoid bad press, rather than trumpeting punitive actions as a deterrent to others.”

Dave Dayen: Raj Date Retreats to “Sanctity of Contracts” Defense to Excuse CFPB for Suboptimal Servicing Rules

I want to start with a belated story from the weekend. I’m a fan of Chris Hayes’ show on MSNBC – it’s the only cable news I’ve seen outside of Election Night in the last year or two. He puts on issues that get virtually no attention elsewhere and he’s responsive to his audience. Over the weekend I noticed that he was to have Raj Date on, formerly number 2 at the Consumer Financial Protection Bureau. So I asked Chris on Twitter if he could bring up the CFPB’s servicing rules, which I chronicled at Washington Monthly. To review, the rules kind of nibble around the edges, but do nothing to fix the wrongheaded financial incentives that lead servicers to reap rewards from foreclosures and avoid principal reductions because it would hurt their bottom lines.

FDIC Hides “Scores” of Bank Settlements Since 2007

The FDIC has been doing banks a big favor by agreeing not to publish the fact that they’d engaged in sufficiently wayward behavior for the agency to threaten regulatory action and negotiate a settlement. The Los Angeles Times unearthed this practice via a Freedom of Information Act request:

China’s Exploding Debt

By C.P. Chandrasekhar, Professor of Economics, School of Social Sciences, Jawaharlal Nehru University, New Delhi, India. Cross posted from Triple Crisis

If the international media are to be believed the world, still struggling with recession, is faced with a potential new threat emanating from China. Underlying that threat is a rapid rise in credit provided by a “shadow banking” sector to developers in an increasingly fragile property market.

Did Intrade Do an MF Global?

By Rajiv Sethi, Professor of Economics, Barnard College, Columbia University. Cross posted from his blog

Treasury and Fed Officials Prevaricate Before Elizabeth Warren About Whether They Will Ever Get Tough With Banks

It’s a good thing Elizabeth Warren seems to regard contending with uncooperative, evasive and obviously misleading witnesses as a form of sport. I’d want to punch them.

The Growing IT Mess at Big Banks

There is a very useful and accessible article at BBC (hat tip Richard Smith) on the information technology hairballs and baked-in level of future problems at major banks. The article was prompted by widespread problems at NatWest this week in accessing accounts.

Even American Banker is Savaging the OCC’s Mortgage Settlement

It’s clear the OCC is winging details it should have nailed down before settling.

Whistleblower: Wells Fargo Fabricated and Altered Mortgage Documents on a Mass Basis

Over the last two and a half years, Wells Fargo, like most of the major mortgage servicers, claimed that it had a “rigorous system” to insure that mortgage documents were accurate and complete. The reason this mattered was that there was significant evidence to the contrary. Foreclosure defense attorneys found repeatedly that, for securitized mortgages, the servicer or foreclosure mill attorney would present documents to the court that failed to show the borrower’s note (a promissory note) had been transferred properly to the trust. This mattered not only on a borrower level, but indicated that originators of the mortgage securitizations hadn’t bothered transferring the notes properly to the trusts that were to hold them. This raised the ugly specter of what was called “securitization fail,” that investors had been sold securities that they had been told were mortgage backed when they might in practice not be.

The robosiging scandal was merely the tip of the iceberg of mortgage and foreclosure problems that resulted from the failure to adhere to the requirements of well-settled state real estate law. The banks maintained that there was nothing wrong with mortgage ownership or with the records. All they had were occasional errors and some unfortunate corners-cutting with affidavits. If they merely re-executed all those robosigned documents, all would be well.

Wells Fargo’s own actions say the reverse.

The Government Has It Bass-Ackwards: Failing To Prosecute Criminal Fraud by the Big Banks Is Killing – NOT Saving – the Economy

Failure to Prosecute Fraud Causes Economic Downturns

As Dow Sprints to New High, the Middle Class and Manufacturing Languish

It’s hard to fathom the celebratory mood in the US markets, save that the moneyed classes are benefitting from a wall of liquidity reminiscent of early 2007, when risk spreads across virtually all types of lending shrank to scarily low levels. Then the culprit was not well understood, although Gillian Tett discerned that CDOs were a huge source of leverage, and in April 2007, an analyst, Henry Maxey at Ruffler, LLC, did an impressive job of piecing together how levered structured credit strategies were driving market liquidity.

Now it’s a lot easier to see what is afoot.

Minimum Wage Households That Get Pay Increases Typically Increase Their Borrowing Even More

The debate around Obama’s proposed minimum wage increase (when he had promised to deliver an even bigger wage rise in his first term) focuses mainly around how much economic stimulus it will provide and whether it will simply lead employers to cut worker hours (given how obscene corporate profits are, most companies have plenty of room to pay their employees more, even if their kvetching would lead you to believe otherwise. Remember, companies used to share the benefits of productivity gains with workers; it was in the later 1990s they started keeping the upside all for themselves). But a look at that question reveals what low wage workers do when they get pay increases.

Is the Eurozone Nearing a Make or Break Point?

One of the dangers of trying to understand what is going on in the Eurozone if you are a hapless but interested American isn’t simply that you’d have to be fluent in a lot of languages to keep on top of the media, but the media themselves are, as NC readers know well, not exactly reliable. Look at how much dictation from business and political leaders masquerades as news in the US. And we have a less controlled press than, say, Italy does.

So I will give readers some fresh data points and let you duke it out.

Student Loan Bubble So Big It’s Trumping Credit Cards as a Spending Driver

It turns out Lambert’s mother-in-law research is pretty good.

Congressmen Criticizing OCC Mortgage Settlement, While More Misrepresentations and Coverups Emerge

The Wall Street Journal today stresses that a lot of Democratic congressmen are unhappy about the botched settlement process but are unlikely to do more than beef because the new Comptroller of the Currency, Tom Curry, was selected by Obama.

But the more people poke at the settlement, the more creepy crawlies emerge.