Betting for the Little People: Timmeh Geithner Departure Watch

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Apparently, Timmeh Geithner has told Obama that he may leave after a budget deal, citing family considerations.

I’d be singing “ding dong the wicked witch” if I didn’t know that his replacement will almost certainly be even worse.

But while we wait on his departure, I thought I’d offer the following two betting pools:

1) What bank do you think Timmeh will revolving door into?

2) Which will have a new head first, Treasury, or the Consumer Financial Protection Board?

FWIW, my guesses are:

1) JPMorgan Chase–and I sort of worry that Obama is planning a 1-to-1 swap like he pulled off with David Petraeus and Leon Panetta. After all, like CIA and DOD, JPMC and Treasury have effectively merged of late.

2) Of course, Treasury will have a new head first. In fact, I’d be shocked if Obama didn’t use a Timmeh departure as an excuse to put the CFPB on ice.

Of course, the only solution to all this is to appoint Liz Warren as Treasury Secretary. And also, to teach pigs to fly.

 

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Bank of America Offers to Pay $8.5 Billion to Stay in Business

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DDay and Masaccio and Yves Smith have already covered Bank of America’s offer to pay 2 to 3 cents on the dollar to make good on its securitization misrepresentations. But I wanted to point out one issue of timing.

In her coverage of it, Yves notes the following:

So with all these considerations arguing for fighting a few more rounds, and BofA in the past taking a very aggressive posture on disputing these cases, why would it settle?

The other side has no ability to judge what it might get since it has not gotten access to the loan files (the Clayton reports that everyone makes noise about which found pretty significant violations of representations, did not look at which were significant from a risk of loss perspective. So they may make for great headline, but they aren’t very helpful in this context.

Put it simply: BofA can judge what its risks are VASTLY better than the investors. There are a lot of reasons why it would make sense for BofA not to settle now. Yet it was all over this like a cheap suit. That says it must regard this settlement as a real bargain.

While DDay alluded to this in his post, I wanted to make an explicit reminder. BoA has agreed to this settlement just weeks after Abigail Field did the work the Attorneys General and other regulators should have been doing. And she found that for a sample of NY foreclosures, Countrywide had endorsed none of the notes of Countrywide-generated mortgages.

Last November, a decision in a New Jersey bankruptcy case brought to light the testimony of Linda DeMartini, operational team leader for the litigation management department for Bank of America, which intended to prove the bank had the right to foreclose on a debtor’s mortgage. Instead, her testimony was key to the judge’s ruling that Bank of America (BAC) couldn’t foreclose, and along the way DeMartini made two statements that called into question the securitization of Countrywide loans. She testified that Countrywide didn’t deliver the notes to the securitization trustee, and that Countrywide notes weren’t endorsed except on a case-by-case basis generally long after securitization ostensibly occurred. Both steps are required, in one form or another, under all securitization contracts.

[snip]

To check DeMartini’s testimony, Fortune examined the foreclosures filed in two New York counties (Westchester and the Bronx) between 2006 and 2010. There were 130 cases where the Bank of New York (BK) was foreclosing on behalf of a Countrywide mortgage-backed security. In 104 of those cases, the loan was originally made by Countrywide; the other 26 were made by other banks and sold to Countrywide for securitization.

None of the 104 Countrywide loans were endorsed by Countrywide – they included only the original borrower’s signature. Two-thirds of the loans made by other banks also lacked bank endorsements. The other third were endorsed either directly on the note or on an allonge, or a rider, accompanying the note.

The lack of Countrywide endorsements, combined with the bank’s representation to the court that these documents are accurate copies of the original notes, calls into question the securitization of these loans, as well as Bank of New York’s right, as trustee, to foreclose on them.

Shortly after Field’s report, NY Attorney General Eric Schneiderman started an investigation of the problem. And, as Field notes in her article,

And if Countrywide’s mortgage securitizations systematically failed as it appears they did, Bank of America’s potential liability dwarfs its shareholder equity, as the Congressional Oversight Panel points out.

In other words, the proof–which we all knew existed–is finally surfacing that Bank of America could and probably should be wiped out by its liability for Countrywide. The dog and pony show calling this a huge settlement no doubt is designed to convince everyone BoA has found a way to put this problem behind it. And remain in business.

So, yeah, $8.5 billion to remain in business is a bargain.

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More Evil in One Wyoming House than Dick Cheney?

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In Nicholas Shaxson’s book, Treasure Islands, he traces out a network of offshore locations, like Cayman Islands, where corporations and crooks hide their cash. But he also noted that the incorporation laws in various US states allows those same corporations and crooks to hide money right inside the United States.

Reuters has a superb article showing how one house in Wyoming serves just such a function. It focuses on a house at 2710 Thomes Avenue, Cheyenne, Wyoming that serves as the headquarters for 2,000 different corporations, some of them shell corporations, some of the shelf corporations waiting for someone to buy them. Among the corporations shacking up together at 2710 Thomes?

Among those registered at the little house in Cheyenne are two small companies formed through Wyoming Corporate Services that sold knock-off truck parts to the U.S. Department of Defense, according to a Reuters review of two federal contracting databases and findings from an investigation by the Pentagon’s Defense Logistics Agency. The owner of those firms, Atilla Kan, awaits sentencing on a 2007 conviction for wire fraud in a related matter.

Also linked to 2710 Thomes is former Ukrainian Prime Minister Pavlo Lazarenko, who was once ranked the eighth-most corrupt official in the world by watchdog group Transparency International. He is now serving an eight-year jail term in California for a 2004 conviction on money-laundering and extortion charges. According to court records, that scheme used shell companies and offshore bank accounts to hide stolen Ukrainian government funds.

Court records submitted in Lazarenko’s criminal case and documents from a separate civil lawsuit, as well as interviews with lawyers familiar with the matter, indicate Lazarenko controls a shelf company incorporated in Cheyenne that owns an estimated $72 million in real estate in Ukraine through other companies.

[snip]

Another man linked to 2710 Thomes is Ira N. Rubin. Prosecutors allege he created a Rube Goldberg-style network of shell and shelf corporations to further his scams.

In December 2006, the Federal Trade Commission sued Rubin for fraud in federal court in Tampa. Documents in the civil lawsuit allege Rubin used at least 18 different front companies to obscure his role as a credit-card processor for telemarketing scams.

These operations, the FTC alleged, offered subprime credit cards that charged an upfront fee debited from customers’ bank accounts, but the cards were never delivered.

True, this may not amount to more evil than Dick Cheney. But it shows how critical these secrecy jurisdictions are to making corporations a vehicle of crime and other abuse. And, as Shaxson has shown, secrecy jurisdictions are also a key tool for corporations to avoid paying their fair share and for dictators to loot their countries. These kinds of incorporation services are a key tool to sucking the money out of the legitimate economy.

At a time when SCOTUS is giving corporations–even flimsy entities like the scraps of paper at 2710 Thomes–more rights than actual citizens, it pays to understand how easy it is for people to avail themselves of corporate personhood.

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“SWIFT” Boating the Russian Mafia

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Remember that GCHQ/MI6 agent, Gareth Williams, who was found dead in a duffel bag last year?

At first, the narrative around his death centered on rumors he had been killed in a weird gay sex game. Amid such sensational reporting, other articles revealed Williams worked closely with the NSA on wiretapping Rashid Rauf, one of the men involved in the 2006 plot to bring down planes with small bottles of liquid. Williams’ work with NSA is all the more interesting when you consider American manipulation of that investigation and their subsequent squeamishness about sharing the intercepts.

But now there’s a new theory out now (from the Daily Mail, which was early to the now discredited sex crime theory): that Williams was killed by the Russian mafia because he was working on a way to track money laundering.

But now security sources say Williams, who was on secondment to MI6 from the Government’s eavesdropping centre GCHQ, was working on equipment that tracked the flow of money from Russia to Europe.

The technology enabled MI6 agents to follow the money trails from bank accounts in Russia to criminal European gangs via internet and wire transfers, said the source.

‘He was involved in a very sensitive project with the highest security clearance. He was not an agent doing surveillance, but was very much part of the team, working on the technology side, devising stuff like software,’ said the source.

He added: ‘A knock-on effect of this technology would be that a number of criminal groups in  Russia would be disrupted.

‘Some of these powerful criminal networks have links with, and employ, former KGB agents who can track down people like  Williams.’

The rest of the Daily Mail article on this hypes how scary and omnipresent the Russian mafia are.

But money laundering is money laundering. Terrorists do it. Organized crime does it. Spy services do it. Corporations do it (often legally). And banksters do it, among others.

And there doesn’t appear to be anything about this description to suggest the Russian mafia would be specifically targeted by the technology. Indeed, the description of their exposure as a “knock-on effect” suggests everything would be targeted (which sort of makes sense; you can’t track money laundering unless you track the “legitimate” part of finance that makes it clean).

Which is why I find this latest narrative–with its complete lack of attention on the technology, instead focusing exclusively on the Russian mob–so interesting. Because finding a way to track money laundering, of any sort, would just be a new way to do what US intelligence has already been doing with SWIFT.

You’ll recall that SWIFT is the messaging system that tracks international money transfers; our use of it to track terrorist finance was first exposed by James Risen and Eric Lichtblau in 2006. In 2009, the US and EU got in a big squabble over whether the US would continue to have access when the servers moved to Europe. They ultimately signed a deal on access. But in March it became clear we were cheating on that deal–among other things by making all specific search requests orally, thereby bypassing the audit provisions demanded by the Europeans.

I increasingly suspect the furor around the SWIFT disclosures has to do with a concern over maintaining the perceived sanctity of tax havens even as it becomes clear our government has routinely been accessing money transfer information using nothing more than administrative subpoenas.  And I increasingly suspect the ongoing squabble between Europe and the US over SWIFT access has to do with America’s asymmetrical access to what has been described as the Rosetta stone of money transfers.

I’ve become convinced, the response to NYT’s reporting on SWIFT was (and remains) so much more intense than even their exposure of the illegal wiretap program. The shell game of international finance only works so long as we sustain the myth that money moves in secret; but of course there has to be one place, like SWIFT, where those secrets are revealed. And so, in revealing that the US was using SWIFT to track terror financing, the NYT was also making it clear that there is such a window of transparency on a purportedly secret system.And the CIA has, alone among the world’s intelligence services, access to it.

There are hints in Lichtblau’s book that back my suspicion that revealing SWIFT was so problematic because it reveals monetary transfers aren’t as secret as the banksters would like you to think they are. One reason people grew uncomfortable with the program was because “some foreign officials feared that the United States could turn the giant database against them.” (234) Others worried that the US might be “delving into corporate trade secrets of overseas companies.” (248) And when Alan Greenspan helped persuade SWIFT to continue offering US access to the database, he admitted how dangerous it was.

If the world’s financiers were to find out how their sensitive internal data was being used, he acknowledged, it could hurt the stability of the global banking systems. (246)

Now, Lichtblau doesn’t describe explicitly what these risks entail, but this all seems to be about letting the CIA see, unfettered, the most valuable secrets in the world, financial secrets. The world’s globalized elite has to trust in the secrecy of their banking system, but in fact the CIA (of all entities!) has violated that trust.

It turns out (the LAT reported this contemporaneously with the NYT reporting; I’ve just now read this in the context of Risen’s affidavit to quash his Sterling subpoena) that the CIA once developed a clandestine way to access SWIFT but were persuaded not to use it because doing so would “compromis[e] the integrity of international banking.”

CIA operatives trying to track Osama bin Laden’s money in the late 1990s figured out clandestine ways to access the SWIFT network. But a former CIA official said Treasury officials blocked the effort because they did not want to anger the banking community.

Historically, “there was always a line of contention” inside the government, said Paul Pillar, former deputy director of the CIA’s counterterrorism center. “The Treasury position was placing a high priority on the integrity of the banking system. There was considerable concern from that side about anything that could be seen as compromising the integrity of international banking.”

Ah, for the halcyon days when people believed international banking had any integrity to compromise!

My point, though, is that the US has had the potential capability to track Russian mobsters since SWIFT let us access the databases after 9/11, particularly now that we’re making all our specific requests orally. So far as I know, no one has ended up dead in a duffel bag over that access.

Moreover, there would be a great deal of people who would like to prevent the UK from getting their own back door into the global finance system, if that’s really the reason Williams was killed. (Note, Williams was also reportedly about to join the UK’s cybersecurity team, which might offer other reasons to want him dead.) Sure, the Russian mafia are among that group, but so would be many others with the means to murder a spook.

Now, it may be that this entire new narrative is just as sketchy as the sex crime one was. Or it may be that this is a preemptive attempt to suggest only Russian mobsters have anything to hide.

But I do find this latest narrative mighty intriguing.

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Russ Feingold Was Proved Fucking Right

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A number of you have been asking for my intro of Russ Feingold last Thursday. Here it is. Now that I’ve had a chance to see it I realize I had a number of misstatements (and a number of places where I glossed necessary detail–I guess I speak like I blog, for better or worse).

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The Chambermaid’s Revenge: IMF Hacked

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Usually, the apparent purpose of hacks is fairly banal. To steal defense secrets. To profit organized crime. To embarrass a political opponent.

But a reported sophisticated hack on the IMF is far more intriguing.

Because the fund has been at the center of economic bailout programs for Portugal, Greece and Ireland — and possesses sensitive data on other countries that may be on the brink of crisis — its database contains potentially market-moving information. It also includes communications with national leaders as they negotiate, often behind the scenes, on the terms of international bailouts. Those agreements are, in the words of one fund official, “political dynamite in many countries.” It was unclear what information the attackers were able to access.

The concern about the attack was so significant that the World Bank, an international agency focused on economic development, whose headquarters is across the street from the I.M.F. in downtown Washington, cut the computer link that allows the two institutions to share information.

The story mentions market-moving information, so I assume it could just be someone trying to play the bond markets.

But what is the scenario under which hackers compromise IMF’s top secret files to get information on the deals signed between the banksters and debtor nations? While I’d like to see that information–and I’m sure the Greeks rioting in the streets and the Irish stoically bearing down accepting their fate would like to see that information–I don’t understand what entity would sponsor the hackers? Organized crime? China? Hacktivists? If it were the latter–which seems most plausible to me–wouldn’t we already be looking at the demands German banksters made of Greek leaders?

I’m sure we’ll learn more about this in the future. But for now, I’m really curious about who had the means and motive to hack the IMF.

Aside from a bunch of chambermaids, of course.

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Robert Mueller: Anna Chapman and Mohamed Mohamud Are Bigger Threats than Lloyd Blankfein

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As part of Robert Mueller’s reconfirmation hearing, he stated–and then was repeatedly asked–what threats face our country. Here’s how he described these threats in his hearing statement:

The FBI has never faced a more complex threat environment than it does today. Over the past year, we have seen an extraordinary array of national security and criminal threats, from terrorism and espionage to cyber attacks and traditional crimes. These threats have ranged from attempts by Al Qaeda and its affiliates to place bombs on airplanes bound for the United States to lone actors seeking to detonate IEDs in public squares and subways, intent on mass murder.

A month ago, the successful operation in Pakistan leading to Usama bin Laden’s death created new urgency for this threat picture. While we continue to exploit the materials seized from bin Laden’s compound, one of the early assessments from this intelligence is that Al Qaeda remains committed to attacking the United States. In addition, we are focused on the new information about the homeland threat gained from this operation.

We also continue to face the threat from adversaries, like Anwar Alaqui, who are engaged in efforts to radicalize people in the United States to commit acts of terrorism. In the age of the Internet, these radicalizing figures no longer need to meet or speak personally with those they seek to influence. Instead, they conduct their media campaigns from remote regions of the world, intent on fostering terrorism by lone actors here in the United States.

Alongside these ever-evolving terrorism plots, the espionage threat persists as well. Last summer, there were the arrests of 10 Russian spies, known as “illegals,” who secretly blended into American society in order to clandestinely gather information for Russia. And we continue to make significant arrests for economic espionage as foreign interests seek to steal controlled technologies.

The cyber intrusion at Google last year highlights the ever-present danger from a sophisticated Internet-attack, Along with countless other cyber incidents, these attacks threaten to undermine the integrity of the Internet and to victimize the businesses and people who rely on it.

In our criminal investigations, the FBI continues to uncover massive corporate and mortgage frauds that weaken the financial system and victimize investors, homeowners, and ultimately taxpayers. We are also rooting out insidious health care scams involving false billings and fake treatments that endanger patients and fleece government health care programs.

The violence in Mexico remains a threat for the United States, as we saw with the murder of three individuals connected to the U.S. Consulate in Ciudad Juarez in March 2010 and the shooting earlier this year of two DHS Immigration and Customs Enforcement agents in Mexico.

And throughout, we are confronted with instances of corruption that undermine the public trust and violent gangs that continue to take innocent lives. [my emphasis]

So Mueller’s list, in order, is:

  • Al Qaeda-launched attack like the Undie-bomber
  • Self-radicalized attacks like Mohamed Osman Mohamud
  • Spies like Anna Chapman
  • Cyber attacks allegedly launched by China
  • Massive corporate fraud committed by people like Lloyd Blankfein that weakens our financial system
  • Health care scams
  • Drug cartel violence
  • Public corruption

Now, I take the order here as some sort of prioritization. And that view is born out by Mueller’s answers to several questions about the threats facing the US. He always mentioned terrorism, including terrorism committed by people self-radicalized via the Internet. He mentioned cyber attacks. He raised the risk of drug cartel violence again.

But unless I missed it, in his extemporaneous descriptions of the threats facing our nation, Mueller did not again mention financial fraud. Update: In a response to Amy Klobuchar’s version of this he said FBI had a,

backlog of mortgage fraud and white collar criminal cases that we are assiduously working through.

So maybe that includes Blankfein (though mortgage fraud usually means garden variety local fraud).

In other words, in spite of his concession that the banksters’ “massive corporate frauds … weaken the financial system and victimize investors, homeowners, and ultimately taxpayers,” Mueller seems to think that a hapless teenager framed by the FBI represents a bigger threat to our country than Goldman Sachs crashing our entire economy.

Too bad for the American people that Congress is falling all over itself rushing to reconfirm Mueller.

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Karl Rove, Bankster Bailer

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I’m not surprised that Karl Rove has weighed in on the foreclosure fraud scandal with an erroneous op-ed in the WSJ. I’m just a bit baffled why he did so now.

The overall gist of the op-ed is that a $20 billion settlement of the robosigning scandal would represent “a money grab in search of a crime.”

It is fundamentally unfair, even devious, to fleece banks out of billions, ignore victims of “robo-signing” who were wrongly evicted, and then hand out cash to cronies. The $20 billion bank stick-up is a transparent attempt to pay some voters a thinly disguised election year bribe, while pretending the money didn’t come from millions of middle-class families with a checking account, loan or credit card at an affected bank.

Of course the entire argument ignores the meaning of the word “settlement,” which suggests an agreement between multiple parties, including the banks who presumably would reject such a settlement if they didn’t believe it would provide them some kind of benefit (such as preventing them from going bankrupt due to all the shitty loans they securitized).

And while I can see why Rove wants to pitch this story as a contest between deadbeat homeowners (most of whom, of course, are middle class) versus the middle class, I’m not sure how families doing consumer business with banks would pick up the tab here. Is Rove suggesting banks would rewrite existing loan terms to make up for the settlement costs? Violate the consumer card bill of rights to screw card holders to make up the costs? Steal checking account funds to pay what is a paltry fine?

And what about all the investors, for whom principle modifications would be better than the foreclosures they’re getting on shitty loans right now? Doesn’t Karl Rove care about the helpless investors?

This seems to be a favor Rove is doing for the Office of Currency Control and the big banks to try to push back at CFPB and some attorneys general. Indeed, there’s this bizarre claim which I suspect lays groundwork for a future CFPB attack.

The federal government could spend its share of the loot on a long list of programs, including, as one government official familiar with the proposed settlement said, a “borrower’s transitional and educational fund.” Just what does paying someone’s junior college tuition or funding a sabbatical from work—simply because his mortgage is underwater—have to do with repairing the damage of “robo-signing?” Nothing.

How better to discredit teaching consumers how the banks are screwing them than to suggest the consumers would be getting a vacation from work?

But again, why now? Shouldn’t Rove and the banks be a lot more worried about AG Eric Schneiderman’s investigation of securitization? Shouldn’t they be more worried about individual register of deeds demonstrating that most titles in this country are now corrupted? Shouldn’t they worry about suits around the country that may reveal what we all know–that the banks would be lucky to get off with a $20 billion settlement?

So I’m not surprised that Karl Rove is weighing in with one of his patented false screeds. But he seems to have missed the larger picture on this one.

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FBI Takes 2 Years to Indict FBI Agent Facilitating Mortgage Fraud

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Does it help to explain DOJ’s failure to crack down on mortgage fraud that one of the agents assigned to investigate it was instead sleeping with–and helping defend–one of those being investigated for fraud?

The FBI just indicted Special Agent Adrian Busby for allegedly lying about how he helped an informant fight indictment. According to the release, the timeline looks like this:

Later 2007: Busby investigating a mortgage fraud case

Early 2008: Busby starts an “intimate relationship” with source

January 10, 2008: Busby gets his girlfriend named as a confidential source claiming falsely she was not under investigation

February 5, 2008: NYPD arrests source for identity theft and other fraud-related crimes

September 18, 2008: Source’s confidential source status canceled

December 2009: Busby provides source’s defense attorney with law enforcement documents to help in her defense

December 15, 2009: Source convicted

Now, what’s weird about this is that the release lists Busby as “a Special Agent of the Federal Bureau of Investigation.” That is, he seems to be still employed by the FBI.

And don’t you think it strange that it took two years to prove that Busby was lying about helping his apparent girlfriend?

I mean, no wonder DOJ hasn’t gotten around to indicting Lloyd Blankfein for fraud that brought down the entire financial system! It apparently takes FBI two years to put together a simple case of false statements against one of their own agents who was facilitating–rather than investigating–mortgage fraud.

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Please Help Support My Next 525 Posts on Torture

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by June 1st

Support our one-stop shop for in-depth news coverage and hard-hitting activism.

 

Just over two years ago, right around the time I reported that Khalid Sheikh Mohammed was waterboarded 183 times in a month, many of you chipped into the “Marcy Wheeler fund” to support my work; that generosity paid my way until a short time ago. Here’s what that support made possible.

Between May 1, 2009 and yesterday, by my rough count, I wrote 525 posts on torture. I unpacked the torture memos, the CIA IG Report, the OPR Report, and thousands of documents released through FOIA. I showed the bureaucratic games they used to set up our torture program, early efforts to place limits on things like mock execution, followed by more bureaucratic and legal means to get away with violating even those limits. I showed how they hid documents and altered tapes to hide evidence of their torture. I showed how, after CIA and parts of DOJ tried to put limits on torture in 2004, they again used bureaucratic tricks and ridiculous legal documents to reauthorize it. I’ve tracked DOJ’s kabuki claims to investigate torture (though bmaz gets credit for forcing DOJ to admit John Durham’s torture tape investigation had run out the clock on Statutes of Limitation). And I’ve tracked the Obama Administration’s successful efforts to suppress all evidence of torture. And all the while, I’ve relentlessly pushed back against the torture apologists’ lies.

Of course, while writing about torture is a major part mapping out the decline of the rule of law, it’s not the only part. Since May 2009, I’ve written almost 200 posts on wiretapping, almost as many on our Gitmo show trials, posts about state secrets, drones, fusion centers, the forever war metastisizing around the world. I’ve written about Wikileaks and Bradley Manning’s treatment and the banksters and the auto companies.

Cataloging the decline of the rule of law has been exhausting and infuriating. The work has been challenging.

But most of all, it has been humbling. That’s because you made this happen, as much as I did.

In addition to the absolutely brilliant observations you’ve made in comments, your support, two years ago, made this work possible. I’m profoundly grateful that many of you invested your faith and financial support in my work.

And now I’m asking for your faith and financial support again, to support the next 525 posts on torture. This time that support will come in the form of an ongoing Firedoglake membership. By becoming a member of Firedoglake, you will not only give my work some stability over the long term, but support the superb work of Jane and DDay and Jon Walker, and just as importantly, the work of the people backstage who make this all technically possible. And you will become a closer part of our efforts to push our country in the right direction, to return to the rule of law.

Please join Firedoglake today.

I hope some day soon we’ll begin to make headway against our expanding national security state. I hope some day, I won’t feel the need to write a post on torture five days a week. But until then, I feel compelled to write about what is happening to our country. And I can only continue to do that with your help.

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