Revisiting the Financial Crisis: Predatory Lending

According to a Wall Street Journal article, former Federal Reserve Governor Edward Gramlich proposed in 2000 to crack down on predatory lending in the subprime mortgage industry. Chairman Alan Greenspan shot down the proposal.

"I would have liked the Fed to be a leader" in cracking down on predatory lending, Mr. Gramlich, now a scholar at the Urban Institute, said in an interview this past week. Knowing it would be controversial with Mr. Greenspan, whose deregulatory philosophy is well known, Mr. Gramlich broached it to him personally rather than take it to the full board.

"He was opposed to it, so I didn't really pursue it," says Mr. Gramlich, a Democrat who was one of seven Fed governors.

Predatory lending was very real. Washington Mutual Bank was bought by JP Morgan Chase. The United States District Court for the Central District of California ruled against JP Morgan Chase.

The first formal complaint was filed against Washington Mutual Bank on January 6, 2012 by the Kenneth Eade Law Firm. Washington Mutual was eventually purchased by JP Morgan Chase. The complaint alleges that Washington Mutual Bank issued both a traditional mortgage and a home equity line of credit in order to finance a customer's Southern California home purchase. In 2008 both loans fell into foreclosure, and the owner's request for a short sale was denied.

After JP Morgan Chase took ownership of Washington Mutual, the bank attempted to collect approximately $250,000 additional dollars from the home equity line of credit. The delinquency also negatively affected the customer's credit score. According to anti-delinquency statutes in California, a bank is prohibited from collecting on money mortgages after a foreclosure has occurred. The suit alleges that JP Morgan Chase is in violation of the federal Fair Credit Reporting Act as well as the California Consumer Legal Remedies Act.

JP Morgan Chase was trying to quickly collect cash from homeowners. In Florida, the defunct David J. Stern law firm attempted to foreclose on homeowners with forged documents.

JP Morgan Chase bought Washington Mutual so they could sell the bad mortgages as mortgage-back securities. The problem was JP Morgan Chase didn't tell investors that the mortgage-backed securities were toxic. JP Morgan Chase was forced to agree to a $13 billion settlement with the state of New York. $4 billion of the money went for relief to homeowners.

New York Attorney General Schneiderman had less than kind words for JP Morgan Chase.

“Since my first day in office, I have insisted that there must be accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy,” said Attorney General Schneiderman, co-chair of the RMBS working group. “This historic deal, which will bring long-overdue relief to homeowners around the country and across New York, is exactly what our working group was created to do. We refused to allow systemic frauds that harmed so many New York homeowners and investors to simply be forgotten, and as a result we’ve won a major victory today in the fight to hold those who caused the financial crisis accountable.”

Goldman Sachs bought derivatives that bet on the housing market crashing. Goldman Sachs sold to their investors bad mortgage-backed securities.

Sen. Carl Levin questioned CEO Lloyd Blankfein about about Goldman Sachs betting against investments they are selling.

Levin reads internal emails of Goldman Sachs sale force telling each other that Timberwolve was a "shitty deal" for their clients.

An internal email shows that Goldman Sachs knew they making money betting against their clients.

The predatory lending placed homeowners at risk. The mortgages were then bundled up into toxic mortgage-backed securities that hurt such investors as pension funds. Alan Green span did nothing about this when he had the chance in 2000.

Occupy Tampa Protesting the National Defense Authorization Act

Sen Carl Levin said on the floor of the Senate that President Barack Obama asked Congress to write language into the National Defense Authorization Act that would give the President the power to detain people indefinitely without a trial. The military will have the power to detain United State citizens on American soil.

In the video, Levin says that the President asked that the language to exclude United States citizens from detention by the military on U.S. soil.



LEVIN: The administration asked us to remove the language which says U.S. citizens and lawful residents would not be subject to this section. Is the Senator familiar with the fact that it was the administration asked us to remove the very language which we had in the bill? Which passed the committee, and that we removed it at the request of the administration...

How much clearer can Levin be?

Here is the language in the bill that allows for indefinite detention of U.S. citizens.



The language in the bill says "indefinite detention." According to Levin, the Obama administration objected to the language that would have legally protected the Fifth amendment rights of American citizens.

Amendment 5

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

The Iraq war is officially over. We have a timetable to leave Afghanistan. Exactly how does President Obama and Congress justify holding U.S citizens without due process?

Update: Occupy Tampa will protest in Ybor City at 5 o’clock at Centro Ybor today. WMNF has a report on the upcoming protest.

The poll results shows solid support for repealing "Don't Ask, Don't Tell." Which makes it insanely stupid for Democrat Carl Levin to be negotiating with John McCain to strip the DADT repeal language from the defense appropriations bill. You know Levin has miscalculated when Joe Lieberman is on the right side of the issue.

“The Senate has passed a defense bill for 48 consecutive years. We should not fail to meet that responsibility now, especially while our nation is at war,” Sens. Joe Lieberman (I-Conn.), Mark Udall (D-Colo.) and Kirsten Gillibrand (D-N.Y.) said in a joint statement on Tuesday. “We must also act to put an end to the ‘don’t ask, don’t tell’ policy that not only discriminates against but also dishonors the service of gay and lesbian service members.”

I agree with Matt Yglesias that Republicans filibustering the defense appropriations bill would be a politically losing proposition.

The White House seems to be getting the message. It is amazing how the Obama administration wants to cater to the base after a bruising midterm election. This is why I continue to say progressives shouldn't be Democratic apologists. The only way to get good legislation passed is to put pressure on Democratic leaders. Remember, the White House killed a DADT repeal amendment when it had super-majorities in 2009.

McCain Crazy Rant Hate Crimes & DADT

John McCain on the Senate floor is what conservatives wanting to maintain the status quo on homophobia sound like. McCain shouts and waves his hands in the air. Carl Levin defeats McCain's by pointing out the Hate Crimes bill was already voted upon in the Senate. Levin is amazed McCain is debating already decided legislation.

McCain complains about how Republicans don't get their amendments in legislation. That would have something to do with Democrats holding the majority. Sen. McCain did his part to help Democrats win the Senate by being on the top of the ticket.

McCain makes an argument against 'Don't Ask, Don't Tell.' Levin points out to McCain every member of the Senate will have an opportunity to vote on 'Don't Ask, Don't Tell.' That is the last thing McCain wants.

Goldman Sachs Plays the Delay Game

Goldman Sachs testified to the Senate Permanent Subcommittee on Investigations. Their strategy was to deny any wrongdoing and run the clock out on each of the senators time of questioning.

Sen. Carl Levin nailed Goldman Sachs for knowingly selling investors Timber Wolf Securities. An internal e-mail described Timber Wolf as a "shitty deal." Short answer: Goldman Sachs knowing bilked investors.



The most sickening moment was Goldman Sach's Vice-President Fabrice Tourre doing the Jesus Christ pose.

Fabrice Tourre, the 31-year-old, Stanford-trained, French whiz kid working for Goldman out of London, was indignant. "I have been the target of unfounded attacks on my character and motives," Tourre told the Senate Permanent Committee on Investigations.

Those attacks include Goldman Sachs betting against the housing market and making a fortune. The result of Goldman Sachs actions was helping the housing market crash. So Mr. Tourre can spare us the martyr act.

Goldman Sachs intentionally sold high-risk bonds to home-owners. Goldman Sachs wanted to rid themselves of risky bonds and make money by leveraging the housing market. The e-mails tell the story.

Clients’ Questions

The e-mails show that as early as the fall of 2006 clients were questioning products tied to the mortgage market. On Oct. 19, 2006, Mitchell Resnick sent an e-mail to two colleagues asking whether the firm had material about “how great” BBB bonds tied to home loans were. BBB is a credit rating from Moody’s Investors Service and Fitch Ratings that indicates an asset is two levels above junk.

“A common response I am hearing” from potential investors is “a concern about the housing market and BBB in particular,” Resnick wrote. “We need to arm sales with a bit more. Do we have anything?”

Goldman Sachs Chief Financial Officer David Viniar convened a meeting of mortgage traders and risk managers on Dec. 14, 2006, according to a document prepared by the firm that the Senate panel released yesterday.

‘Net Long’

At the time, Goldman Sachs had a “net long exposure” to the subprime-mortgage market, meaning the bank was betting the market would continue to rise. At the meeting, executives agreed that the firm should “reduce its overall exposure to the subprime mortgage market,” the document said.

Goldman Sachs’s Stacey Bash-Polley sent an e-mail to colleagues six days later with the subject line “Mezz Risk,” a reference to lower tranches of collateralized debt obligations linked to mortgages. Investors in mezzanine tranches are among the first to lose money when the asset starts souring.

“We have been thinking collectively about how to help people move some of the risk,” wrote Bash-Polley, an executive in the Goldman Sachs division that sold bonds. “We need to make sure we arm” salespeople “with our pricing and have them focus on the more difficult positions.”

Targeting Clients

In targeting clients, Bash-Polley wrote that Goldman Sachs should focus on those that “can possibly do larger size at a level that would be attractive when you take into consideration the size of risk we could move.”

“Makes sense to me,” responded Kevin Gasvoda, a Goldman Sachs colleague.

Now you may understand why I don't feel sorry for Mr. Tourre.

Bush: Stay In Iraq Forever

President Bush wants to maintain an "enduring" relationship with Iraq. The short version is a continued U.S. military presence.

Security: To support the Iraqi government in training, equipping, and arming the Iraqi Security Forces so they can provide security and stability to all Iraqis; support the Iraqi government in contributing to the international fight against terrorism by confronting terrorists such as Al-Qaeda, its affiliates, other terrorist groups, as well as all other outlaw groups, such as criminal remnants of the former regime; and to provide security assurances to the Iraqi Government to deter any external aggression and to ensure the integrity of Iraq's territory.

Senators Jim Webb (D-VA), Bob Casey (D-PA), Robert Byrd (D-WV), Ted Kennedy (D-MA), Carl Levin (D-MI) and Hillary Clinton (D-NY) responded to that with a terse letter to the President. Short version: not without Congressional approval.

The future of American policy towards Iraq, especially in regard to the issues of U.S. troop levels, permanent U.S. military bases, and future security commitments, has generated strong debate among the American people and their elected representatives. Agreements between our two countries relating to these issues must involve the full participation and consent of the Congress as a co-equal branch of the U.S. government. Furthermore, the future U.S. presence in Iraq is a central issue in the current Presidential campaign. We believe a security commitment that obligates the United States to go to war on behalf of the Government of Iraq at this time is not in America’s long-term national security interest and does not reflect the will of the American people. Commitments made during the final year of your Presidency should not unduly or artificially constrain your successor when it comes to Iraq.

The letter is a waste of time. When does Bush ever listen to anyone that is not a neoconservative when it comes to foreign policy matters. I am open to bases in Kurdistan, as well as diplomatic efforts to ease the tensions between the Kurds and Turkey. The Kurds have made it quite clear they have no interest in a longterm U.S. military presence.

The sad thing is the Kurds are the most friendly Iraqis towards the United States. When they want Americans gone that shows all efforts to win the hearts and minds of Iraqis is over. Nouri al Maliki only wants the United States to stay because his days of political power are over the moment the last boots leave the ground.