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Richard Blumenthal Asks Eric Holder Where the Foreclosure Prosecutions Are

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It took until Richard Blumenthal’s turn in Eric Holder’s appearance before the Senate Judiciary Committee today before Holder got asked about foreclosure fraud. Blumenthal generously suggested that, “I know the foreclosure crisis is on your agenda,” and then asked if we’ll ever see a prosecution on robosigning and other fraud.

Holder responded, at first, by pointing to states Attorney Generals, claiming they are conducting investigations. I do hope he’s thinking of Eric Schneiderman, Beau Biden, and Catherine Cortez Masto, because the ones working on the settlement are pointedly avoiding any real investigation. Holder then further dodged, suggesting DOJ might find other ways–like civil suits–to hold these banks accountable.

Finally, and perhaps most interesting, Bluementhal asked why DOJ had not intervened in the Bibby, Donnelly v. Wells Fargo suit, a whistleblower suit against Wells Fargo, BoA, Chase, Ally, and others for the illegal legal fees the banks charged homeowners, including veterans.

Holder hedged in response to that question, promising he’d find out who had made the decision not to intervene and the basis for the decision.

Unfortunately, Blumenthal pointedly avoided asking for a 30 day response to that request. So an explanation for why DOJ isn’t helping to sue banks for the illegal fees they’ve charged will probably come long after DOJ settles for those illegal fees.

Liveblog: Senate Banking Committee on Foreclosure Fraud

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See Part One of this liveblog here.

Shelby was actually pretty good, but then Johanns and Bennett went to some length to try to pretend the banksters weren’t doing what they were doing.

Johnson: Does the law need to be change?

Levitin: It’s not the law, it’s compliance w/the law. What was governing securitization was private contractual law. Servicers allowed to contract around UCC in Pooling and Servicing Agreements. Generally requirements set forth in PSAs not followed. A good reason for PSAs to be written the way they are: bankruptcy remote. If you don’t have that chain of endorsements, it’s going to be very difficult to prove you’ve got the chain of transfers in BK remoteness.

Levitin: This is a problem with following the law.

Johnson: What were barriers to recognizing doc problems that exist.

IA AG Tom Miller: People coming forward in foreclosure issues.

Johnson: What are the conflicts of interest?

BOA Desoer: “We do not take seconds into consideration” when modifying a first. 2nd Lien not an obstacle, does not get taken into consideration.

Chase Lowman: Second liens do not get in way of modifying first.

Tester: [referring to cases he’s followed in MT] It’s not a pretty picture. [Describes constituent told by BoA not to make any payments] Can you tell me how servicer can ever tell homeowner not to pay a mortgage.

BoA Desoer: That is not what we should be telling homeowners.

Tester: Would you attribute this to employee that screwed up.

BoA Desoer: We will reinforce that aspect of communication to our teammates.

Tester: How can someone receive notice he’s in foreclosure before foreclosure process restarted?

BoA Desoer: [Dodges] The sale will not take place, but that customer will continue to get notices.

Tester: These particular hearings not particularly enjoyable for me. Not an isolated incident. MT is not a state where people come to Senator willy nilly. I don’t know how many people didn’t come to me and they just wound up on the street. It’s clear servicers have been a little bit glib, particularly about risks to their own balance sheets. Quite frankly, there ain’t gonna be more bailouts.

IA AG Miller: We want to work with the banks and the Feds.

Tester: Go to what Levitin said about Countrywide. This can be taken care of by the servicers. Their heads need to roll.

Merkley: GSEs say if foreclosure has begun before mod, servicer continue foreclosure during Mod. Is continued pestering on foreclosure during mod due to parallel processing.

Chase: Foreclosure sale won’t take effect.

Merkley: You don’t take the final step. [Now repeats a story on similar story of parallel processing] Can’t we just change this policy and suspend proceedings while mod going on?

Chase: New process prescribed by HAMP would necessitate that we enter into Mod process and engage prior to commencement of foreclosure.

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Citi’s Fear

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I wanted to return to a detail I mentioned in yesterday’s book salon. As I noted, in his book on the auto bailout, Steven Rattner described Citi as being worried during the Chrysler negotiations that retail customers would retaliate if Citi played hard ball.

Bankers for Goldman and Citi had advised [JP Morgan Chase VP and the Chrysler bondholder’s lead negotiator] Jimmy Lee to make the best of a bad situation. Privately they felt his brinksmanship was embarrassing and potentially costly. Citi especially wanted to avoid a liquidation. Its analysis showed it would recover no more than 20 cents on the dollar in that instance. Citi also feared losing business in its branches in states like Michigan and Ohio where consumers might blame it for Chrysler’s demise. (173)

That didn’t make sense to me given that Citi doesn’t have branches in MI and OH; the closest actual branches are in Chicago. Compare that to Chase, which just took over from Comerica as the biggest bank in MI by deposits and was presumably second at the time of the bailout negotiations. Citi should only fear retaliation from consumers elsewhere, in those urban areas that actually have Citi branches, or they should fear retaliation some other way, presumably through their credit card business. I asked Rattner why Citi was worried, but JP Morgan Chase was not, given its much greater involvement in the auto states. He responded, “Yes, they were definitely worried.”

Frankly, I don’t know what to make of this. Given the context of the claim–in which Goldman and Citi are portrayed as talking Jimmy Lee down from a hardass negotiating position–JPMC appears not to have been sufficiently worried to change its behavior. And the Citi claim doesn’t make sense on its face. Perhaps Citi was worried about something else. Perhaps they were just more worried because they were insolvent? There are a few details he pretty clearly got wrong in his book (such as his claim that Nissan’s consideration of a deal with Chrysler was secret), but this seems instead like one of the abundant examples of where Rattner is an unreliable narrator. Rattner chose to portray Citi as worried (and quickly agree the hard-bargaining JPMC was, too), but it’s unclear whether that was really true or just nice spin on the banks.

What Rattner probably didn’t know was that FDL was trying to increase this worry at the time by encouraging people to take their money out of Chase. That was a mostly unsuccessful effort (let me tell you, Chrysler is  no more popular in this country than the big banks) to target the banksters for actions that hurt the communities they’re in.

As unsuccessful as our effort was in terms of numbers, if Rattner-the-unreliable-narrator’s claim has any basis in fact, then our effort to pressure JPMC to behave better worked. Sort of.

Since then, Arianna’s Move Your Money campaign has more successfully advocated for people and institutions to move their money out of the big banks. By April, they claimed $5 billion had been moved. And it does seem like some of the banks are losing market share to smaller banks.

The largest banks in Michigan are losing market share and Chase Bank now has the most deposits in the state, according to new data released Thursday by the Federal Deposit Insurance Corp.

As of June 30, the five biggest banks in Michigan — Chase Bank, Comerica Bank, PNC Bank, Bank of America and Fifth Third Bank — accounted for 55% of all deposits in the state. That’s down from 57.3% on June 30, 2009.

I raise all this because of another interesting discussion about whether consumer action might more effectively target the banks. Via Yves Smith, I found this Playboy article on Edmundo Braverman’s WallStreetOasis.com’s proposal on How to Destroy a Bank (Yup, it appears you have to have a pierced navel and no pubic hair to be a Playboy model these days).

This article set forth a plan for how consumers could destroy one of America’s four largest banks. Customers would deliver a series of escalating threats against Wells Fargo, Bank of America, JPMorgan Chase and Citibank, demanding policy changes. The threats would culminate in a series of flash-mob bank runs that targeted one of the banks.

In a comment in Yves thread, Braverman acknowledged his idea was a thought exercise to take Move Your Money the next step.

The whole thing was inspired by Arianna Huffington’s “Move Your Money” idea. I thought it was a good idea, but not one that would be dramatic enough to produce any changes in the way the banks did business. So I asked myself, “What would have an impact on the banks?” and that’s when I came up with the Tank-A-Bank plan.

It was always just a thought exercise, and never something I advocated.

Yves seems to be thinking more about this; what can consumers do that won’t get them jailed as terrorists but will get us to a point where the finance industry isn’t dragging our country down even while stealing our money in the process?

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Save American Jobs: Close Your Chase Account

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It’s time we started pressuring the banksters in the only language they understand: their pocket-books. If they begin to lose customers who refuse to let their money be used to gamble away American jobs and taxpayer money, then they might start thinking about the good of the country for a change.

So mr. emptywheel and I took that step today. We closed our Chase accounts (which, because mr. ew recently took a buy-out, was a not-insignificant amount) and put that money into a credit union that’s supporting Michigan, not trying to bankrupt it. 

Here’s how I explained to the Chase people why we were closing our accounts.

I’m closing my Chase accounts because JP Morgan Chase has placed its corporate interests above the jobs and health care of the people of my community, unlike other banks that continue to invest in rebuilding Michigan.

JP Morgan Chase insists on putting Chrysler into bankruptcy

On Saturday, the Wall Street Journal reported that JP Morgan is “resisting government pressure to swap” its Chrysler debt for equity in a restructured Chrysler. But if JP Morgan refuses this swap, then Chrysler will be forced into bankruptcy within a month.

According to the Wall Street Journal, JP Morgan prefers bankruptcy because, “billions of dollars of government debt and the UAW retiree health-care obligation [would] be wiped out before the secured lenders [JP Morgan and other big banks] lose anything.” In other words, JP Morgan wants to force Chrysler into bankruptcy so it would get repaid before all other creditors—including Chrysler retirees and US taxpayers.

JP Morgan Chase has already gotten billions from US taxpayers

Such cynical economic considerations might be understandable coming from other banks.  But JP Morgan Chase has already received $25 billion in TARP funds from American taxpayers. And the taxpayer bailout of AIG ensured JP Morgan Chase got $1.2 .4 billion [corrected] in its AIG deals paid off at full value.

With all that taxpayers have already given to JP Morgan Chase, isn’t it time JP Morgan Chase started to give back to the communities it serves?

JP Morgan Chase’s actions will mean hundreds of thousands lose their jobs and healthcare

Instead, JP Morgan Chase’s corporate single-mindedness threatens to put 40,000 Chrysler workers in Michigan out of a job, along with 150,000 Chrysler dealer employees and tens of thousand workers at Chrysler’s suppliers.

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