Senate Banking Commitee on Foreclosure Fraud

Follow along on CSPAN or the Committee Site.

Dodd started by noting the increasing evidence that foreclosure fraud is a giant mess, both by referencing the Bank of America testimony that notes did not get sent to trusts during the securitization process, and by noting that the estimates for how much this may cost the bank have gone up, to $134 billion.

Btw, it’s not part of the hearing, but consider this stat:

Housing and aggregate demand have not recovered because nearly 15 million owners are estimated to owe about $771 billion more on their homes than they are worth.

That basically means that roughly 15 million families have had a $51,000 tax imposed on them, largely because of the bank-created inflated prices.

Thus far, FDIC head Sheila Bair has said that second lien-holders need to take a hit, and Fed Governor Dan Tarullo has said that banks will need to provide estimates for expected putback losses.

OCC Acting head John Walsh says they’ve got 100 Bank Examiners investigating foreclosure fraud.

John Walsh, in response to Dodd’s question about why the regulators have been so delayed, said, “We were conducting horizontal exams in 2008, saw rise in complaints, there were clear deficiencies. We were pushing servicers.” No. He hasn’t explained why they haven’t done anything about these deficiencies.

Tarullo: The attention was focused on pace of modifications, not on the process itself.

Shelby to Tarullo: When did you first learn of the problems.Tarullo: When Ally came to us the day before the public announcement.

Shelby: Are we close to solving problem. Tarullo: Related to relative balance of foreclosures to mods. Need integrated approach.

Shebly: They have standards.

Tarullo: No, the banks are required to have their own processes. Race to foreclose among owners, but be standardized.

Reed: Should 100% of loans be evaluated for mod.

Bair: We think a global settlement.

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Michael Barr–Liaison on Foreclosure Fraud Investigation–Leaves Treasury

Just one week ago, Iowa’s Attorney General Tom Miller told Chris Dodd that Assistant Secretary of the Treasury for Financial Institutions Michael Barr was the key person from Treasury working with the Attorneys General investigation into foreclosure fraud.

Miller: We haven’t had any contact with the [Financial Stability Oversight Council]. We have had repeated contact with the Department of the Treasury, with Assistant Secretary Michael Barr and his staff. We’ve developed a terrific ongoing relationship with them. We talk about these issues and try and help and support each other on these issues. So we’ve had a lot of discussions with Treasury but not with that particular Council.

That’s funny. Because Barr is leaving Treasury. Imminently.

Diana Farrell, deputy director of President Barack Obama’s National Economic Council, and Assistant Treasury Secretary Michael Barr are leaving the administration, adding to the turnover in the ranks of the White House economic team that worked on the government’s response to the worst financial crisis in more than 70 years.

Farrell will leave by the end of the year and Barr’s last day at Treasury will be Dec. 3. Both played key roles in shaping Obama’s financial regulatory overhaul plan, which was signed into law in July.


Treasury spokesman Steve Adamske said Barr would continue his academic career at the University of Michigan in Ann Arbor.

(Note, Barr is not currently listed as teaching next semester.)

In addition to working with the Attorneys General “investigating” the banksters’ foreclosure fraud, Barr had been considered a leading candidate–after Elizabeth Warren–to lead the Consumer Finance Protection Board and/or the Office of the Comptroller of the Currency (the agency that regulates the big banks) and (as the Bloomberg piece makes clear) had a key role in Dodd-Frank.

As you recall, the same day that Tom Miller told Dodd he was working closely with Barr, at almost the moment when Miller said the investigation would take months, sources that sounded an awful lot like the banks were suggesting a deal on the “settlement” ending the “investigation” was close. But even that article didn’t seem to suggest it’d be done by December 3.

Also note, the Financial Stability Oversight Council–the entity set up by Dodd-Frank to stave off systemic crises–meets on Tuesday; they promise to address efforts so far on the foreclosure fraud problem.

The group will provide an update on what various agencies are doing to investigate widespread paperwork problems that have called into question millions of foreclosures across the country, as well as how regulators are coordinating with the Justice Department, state attorneys general and other officials scrutinizing the mess.

Mind you, I don’t know what Barr’s departure means. But I find it notable that–after recently being floated for key positions going forward and given his role in efforts to respond to the foreclosure mess–he is leaving now.

Both Dodd and Frank Call on Admin to Use Powers of Dodd-Frank

DDay has a really important post that–along with a great interview with Brad Miller–includes a letter from Miller and other members of Congress, urging the Financial Stability Oversight Council to take action to prevent the foreclosure fraud problem from becoming a systemic crisis. The letter reminds the FSOC that Dodd-Frank gives them the power to avoid a systemic crisis.

An important purpose of the Dodd-Frank Act is to identify risks to the financial system as early as possible, so that regulators can take corrective action or minimize the disruption to the financial system that results from the insolvency of systemically significant financial companies. It is also a purpose of the Act to make risk to our nation’s financial system transparent in order to restore the confidence of the American people in the financial system and in their government.

And lists three things the FSOC should do to prevent the foreclosure fraud problem from becoming a systemic crisis:

  1. Examine a representative sample of loans to see whether they comply with legal requirements and pooling and servicing agreements.
  2. Determine whether the second liens servicers have on loans have led them to act contrary to the interests of the first lien holders.
  3. Require big banks to divest themselves of servicing businesses.

House Financial Services Committee Chair Barney Frank is one of the first ten people to sign this letter.

Put together with Senate Banking Committee Chair Chris Dodd’s call on Tim Geithner to consider how the FSOC can mitigate the risks of this crisis, you’ve got both Chairmen of the relevant committees urging the FSOC to do something about the potential systemic risk of this crisis. You’ve got Dodd and Frank, the two guys with their name on the financial reform bill, calling on the Administration to use the authority granted under Dodd-Frank to prevent another meltdown.

And thus far?

Crickets. From both the Administration and the media.

Chris Dodd Uses Hearing to Call on Geithner to Do His Job

Chris Dodd didn’t have many questions in yesterday’s hearing on the foreclosure crisis. But he did use the opportunity to call on Tim Geithner to convene the Financial Stability Oversight Council to prevent this crisis from blowing up the economy.

Dodd: Attorney General Miller, at the outset of my opening comments I talked about the importance of getting the, this Financial Stability [Oversight] Council that we established in the Financial Reform Bill to anticipate systemic risk and to collectively work as a body chaired by the Secretary of the Treasury, along with the FDIC and the OCC–there are ten members of that, an independent member and five others that are part of it. This seems to me like a classic example–one that we did not anticipate necessarily when we drafted the legislation, but exactly, we are in a crisis with this. Now you can argue that it’s not yet a systemic crisis that poses the kind of risk we saw in the Fall of 08, but no one can argue that we’re not in the middle of a crisis. Now the idea of this, of course, was to minimize crises so they don’t grow into a large, systemic crisis. Have you had any contact with the Secretary of Treasury? Or is there any communication going on between the Attorney Generals and this Council or the Chairman of it, the Secretary of the Treasury, or their office, to begin to talk about what the role of the federal government might be in formulating an answer to all of this?

Miller: We haven’t had any contact with the Council. We have had repeated contact with the Department of the Treasury, with Assistant Secretary Michael Barr and his staff. We’ve developed a terrific ongoing relationship with them. We talk about these issues and try and help and support each other on these issues. So we’ve had a lot of discussions with Treasury but not with that particular Council.

Dodd: Again I saw [mumble] privately with Senator Warner and others may, Senator Merkley has a similar thought. I’m going to use this forum here, obviously in a very public setting, to urge the Secretary of Treasury and others to convene that Council to begin to work with you and others, so there is a role here to examine this question in seeking broad solutions. So my hope is they’ll hear that request to pick up that obligation that we laid out in that legislation.

You know, when the Chairman of the Senate Banking Community has to use a forum like this to try to remind the Secretary of Treasury of his obligation under Dodd-Frank, it does not inspire a lot of confidence.

Liveblog: Senate Banking Committee on Foreclosure Fraud

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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Chris Dodd’s Newfound Concern about Management Experience

Federal bureaucracies which, according to the confirmation hearing questions he asked of prospective directors, Chris Dodd believes require no management experience to run:

  • Securities and Exchange Commission
  • Housing and Urban Development
  • Federal Housing Administration
  • Export-Import Bank
  • National Credit Union Administration
  • Federal Reserve
  • Federal Deposit Insurance Corporation
  • Office of Thrift Supervision (which oversaw AIG and GE, among other TBTF “entities”)
  • Office of the Comptroller of the Currency

Federal bureaucracy which, according to his recent interviews, Chris Dodd believes can only be led by someone who has what he judges to be adequate management experience:

  • Consumer Finance Protection Board

Call me crazy, but I don’t think Chris Dodd’s newfound concern about management experience stems from either the recognition that his past confirmation negligence led to failures at (in particular) SEC and OTS or his genuine concern that the CFPB wouldn’t effectively protect consumers’ interests if it were led by Elizabeth Warren.

How a Previously Qualified Elizabeth Warren became Unqualified, According to a Previously Progressive Chris Dodd

July 27: Chris Dodd says of Elizabeth Warren, “She’s qualified, no question about that”

August 9: Katrina vanden Heuvel tweets that several sources have told her Elizabeth Warren would be nominated “next week”

August 12: Warren meets with Financial Services Roundtable President Steve Bartlett and then meets with David Axelrod at the White House to discuss the CFPB position

August 13: Robert Gibbs acknowledges that Warren had been meeting about the CFPB position, but says no announcement would be made in the next week

August 17: Chris Dodd raises questions about whether Warren can manage anything to suggest she may not be confirmable even while he admits she has “a great campaign”

“My simple question about Elizabeth is: Is she confirmable?” Dodd said during a visit Tuesday with The Courant’s Editorial Board. “It isn’t just a question of being a consumer advocate. I want to see that she can manage something, too.”

But when pressed about where he stands, Dodd said: “If the president wants to name her and it goes through the hearing process, then fine, he’ll have my support. But she has to tell me more than just she’s a good consumer advocate or that’s she’s got a great campaign.”

I guess the only question this chronology leaves is whether or not Dodd is acting at the behest of his future employers, the banks, the White House, or both.

The Giant Pissing Contest over the Auto Bridge


(Mackinaw Bridge photo from Three if by Bike

Ian and Jane described the solution Dems are crafting on the auto bailout: Roughly $15 billion from the DOE funds (originally intended to help automakers retool to make more efficient cars) would be repurposed into providing bridge loans for Chrysler and GM. After President Obama and the new Congress come in, that money will be replaced with TARP money, and a longer term plan will be developed to see the companies through this crisis.

Keep in mind though: this is just one battle in a giant pissing contest that is far from resolved. There have been three original positions in this pissing contest:

  • Pelosi, Dodd, and Frank (and, presumably, Obama): Give the aid from TARP; save the environment and the domestic auto industry
  • Bush, Paulson, and McConnell: Give the aid from the DOE funds after asking for the first born of every union worker
  • Shelby and Corker: Bust the union and to hell with Toyota’s domestic competition and the Democratic voters it employs

A couple of events set the background to hearings in the last two days. Hank Paulson has begun calling for the second half of the TARP funds, as he has blown through most of the first $350 billion. Yet Democrats want to force Paulson to start bailing out homeowners struggling to avoid foreclosure, rather than just bailing out Paulson’s friends on Wall Street.  And since Paulson wanted to avoid spending any TARP funds on the auto industry, he wanted to avoid discussing TARP before the auto crisis was resolved.

In fact, in a stunning bit of arrogance that no one besides Jane really reported, Dodd had asked Paulson and Bernanke to attend Thursday’s Senate hearing on the auto crisis–and they refused! These assholes, who are preparing to ask Dodd for another $350 billion of our money, refused to show up before Congress, presumably because they simply didn’t want to talk about using TARP funds for bridge loans to the auto industry (note: at the hearing GAO agreed with Dodd that the auto loan request would qualify under TARP guidelines). I suppose because they simply believe the auto industry doesn’t fall under their mandate to keep the economy healthy?!?!

And then, of course, yesterday’s jobs report came in, with the news that our economy is hemorrhaging jobs. Which is reportedly when Pelosi blinked, and agreed to use the DOE funds.

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FISA Liveblog: Chris “Not only do I dress better than Kit Bond, I defend the Constitution, too!” Dodd

Dodd up: Thanks to Reid for leadership on this issue.

Majority leader made clear–this is about Constitution and rule of law. Call up amendment.

The entire amendment: Strike Title II.

Were those warrants sought before the telecoms turned over those communications. Allow co-equal branch to determine whether actions of executive branch were legal. We have 3 co-equal branches of govt. We being legislative should insist that judicial branch determine actions taken.

Thanked a number of Senators–but not Obama.

May seem like a difficult issue to follow. Rule of law v. rule of men. For more than 7 years Bush has demonstrated that he doesn’t respect rule of law. Today considering legislation to grant retroactive immunity to those who are alleged to have cooperated without warrants. Some may argue companies received documentation and that therefore it is automatically legal. They argue mere existence of documentation makes it leagl. Already know companies received some form of documentation. Not whether companies received a document from White House. A very uncomplicated problem. Did the companies break the law? FISC has rejected 5 requests in 30 years. Why not go to court? Why did they depend on paper documentation? Because of this so-called compromise, judge’s hands will be tied. Holding Admin to account for violating constitution. Where law ends, tyranny begins.

Bush’s false dichotomy: to be more security, we have to give up rights. False choice. It’s precisely when you stand up and protect your rights you become stronger. Cannot protect American if you fail to protect the Constitution of the United States.

Eisenhower: The clearest way to show what the rule of law means is to recall what has happened when there is no rule of law.

If we do not stand up for the Constitution, history will decide that those of us in this body bear equal responsibility for looking the other way time and time again. It’s time we stood up for the rule of law. FISA Court strikes a balance between secure nation and nation defending its rights.

Not every phone company did what they did. The ones that didn’t should be celebrated for standing up for the rule of law. Tomorrow we vote around 11:00 in the morning.

Levin noted that this itself can become a precedent. For some future administration to circumvent the FISA courts. This is about whether a court of law should decide. Let’s not decide it by a Read more

“You can play that game when it doesn’t matter.”

Apparently (according to Senator Johnny Isakson), all the posturing the Republicans have done to rip up the safety net and push families into bankruptcy over the last 8 years didn’t really matter. In the last two weeks–since Isakson returned home to Georgia and realized such policies have real consequences for real constituents–they matter.

"Unless every member of the Senate was in a cave over the two-week recess, it’s pretty obvious that gas prices and housing crisis are the two most important issues to the American public," said Sen. Johnny Isakson (R-Ga.), a former real estate broker who was among those urging Republican leaders to stop blocking the legislation. "You can play that game when it doesn’t matter. But people’s lives, their fortunes, their largest single asset is at stake."

Though I suppose I shouldn’t be churlish with Isakson’s recent epiphany, since he is pushing the Republican caucus to actually negotiate with the Democrats.

That said, here’s how the proposed compromise would divvy up money, per the WaPo:

$300 billion guarantee: Allow the FHA to insure refinanced mortgages for homeowners who had become upside-down on their previous mortgages; lenders would have to forgive the previous loan and accept a loan that is no more than 85% of the value of the previous loan (BushCo wants to accomplish this through administrative means, but Republicans are coming around to this Dodd-Frank proposal)

$30 billion: Reimburse the Fed for any losses relating to its Bear Stearns bailout

$14.5 billion: Give people who buy a newly built home, home in foreclosure, or a home whose owner has defaulted on a mortgage in the next year a $5,000 tax credit for the next three years (this is Isakson’s proposal; and in case you’re wondering, yes, Isakson was a realtor before he became a full time politician)

$10 billion: Finance tax-exempt bonds that could be used to finance distressed subprime mortgages

$4 billion: Allow communities to buy and redevelop properties in foreclosure, thereby preventing entire neighborhoods from declining (The White House says this $4 billion–about the cost of paying for two weeks of the wars in Iraq and Afghanistan–is too expensive)

$200 million: Finance additional counselors to help those at risk for foreclosure

No cost: Require lenders to tell borrowers what the highest possible rate for ARMs would be

No cost: Permit bankruptcy judges to change interest rates on mortgages of those in bankruptcy proceedings (this measure is opposed by Republicans)

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