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HUD Digs an Escape Tunnel for Jamie Dimon

The other day I dismissed US disdain for Mexico at its inability to keep Chapo Guzmán jailed. After all, I pointed out, we don’t even try to imprison our Transnational Crime Organization bosses.

At the Intercept yesterday, DDay pointed out another example. After JP Morgan Chase and Citigroup pled guilty to forex fraud, the Department of Housing and Urban Development “changed their form” for FHA insurance, so as to permit those TCOs to continue to have taxpayers insure their customers’ loans.

On May 20 of this year, JPMorgan Chase and Citigroup both entered a guilty plea on one felony count of conspiring to rig foreign currency exchange trades, the largest market on the globe.

Five days earlier, on May 15, HUD slipped a notice into the Federal Register, seeking to alter its standard loan-level certification form, known as HUD-92900-A. This form must be filled out for lenders to receive FHA insurance, which reimburses them if the homeowner falls into foreclosure.

On the current HUD-92900-A form, lenders must certify that their firm and its principals “have not, within a three-year period … been convicted of or had a civil judgment rendered against them” for a variety of crimes, including “commission of fraud … violation of Federal or State antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements or receiving stolen property.”

JPMorgan and Citi’s guilty plea would fall under the antitrust statute, and according to Brown, Warren and Waters’ reading of the certification, that would make them ineligible to obtain FHA insurance on their loans.

On the updated form, this language has been excised.

As Senators Sherrod Brown and Elizabeth Warren and Congresswoman Maxine Waters read it, this will eliminate what should have been one of the biggest impacts of the TCOs’ guilty plea.

Again, Jamie Dimon’s tunnel may not be so spectacular as Guzmán’s. But that’s partly because even more parts of government are helping him to escape any punishment for his TCO’s crimes.

Is Chinese Elite Looting More Newsworthy than Middle Eastern–or US–Looting?

NYT has a really good article today on how the family of Chinese Prime Minister Wen Jiabao has gotten enormously wealthy while he’s been in power. The Chinese government has already started censoring the story itself and discussions of it.

And while I applaud NYT’s coverage of the corruption of the Chinese elite, I was left wondering whether NYT would print the equivalent story on Middle Eastern dictators or–even more unlikely–American elites.

While there has been some coverage of how Hosni Mubarak, Moammar Qaddafi, Ali Abdullah Saleh, or Zine El Abindine Ben Ali looted their countries of billions now that they’ve fallen, one of the only times we’ve heard about Saudi looting came after Riggs Bank got busted.

And while we’ve had reports on Countrywide’s VIP program and the general process by which members of Congress get enormously wealthy on our dime as well as stories focused on those (like Maxine Waters), we rarely see maps like the one NYT drew of the business connections involved.

Partly, I wonder whether the US is just better at hiding these connections. Some of this kind of work would stumble on America’s shell corporations, for example.

In the case of Mr. Wen’s mother, The Times calculated her stake in Ping An — valued at $120 million in 2007 — by examining public records and government-issued identity cards, and by following the ownership trail to three Chinese investment entities. The name recorded on his mother’s shares was Taihong, a holding company registered in Tianjin, the prime minister’s hometown.

The apparent efforts to conceal the wealth reflect the highly charged politics surrounding the country’s ruling elite, many of whom are also enormously wealthy but reluctant to draw attention to their riches. When Bloomberg News reported in June that the extended family of Vice President Xi Jinping, set to become China’s next president, had amassed hundreds of millions of dollars in assets, the Chinese government blocked access inside the country to the Bloomberg Web site.

“In the senior leadership, there’s no family that doesn’t have these problems,” said a former government colleague of Wen Jiabao who has known him for more than 20 years and who spoke on the condition of anonymity. “His enemies are intentionally trying to smear him by letting this leak out.”

And partly it may be lack of self-awareness. NYT complains, for example, that Chinese disclosure laws don’t apply to extended relatives.

In the winter of 2007, just before he began his second term as prime minister, Wen Jiabao called for new measures to fight corruption, particularly among high-ranking officials.

“Leaders at all levels of government should take the lead in the antigraft drive,” he told a gathering of high-level party members in Beijing. “They should strictly ensure that their family members, friends and close subordinates do not abuse government influence.”

The speech was consistent with the prime minister’s earlier drive to toughen disclosure rules for public servants, and to require senior officials to reveal their family assets.

Whether Mr. Wen has made such disclosures for his own family is unclear, since the Communist Party does not release such information. Even so, many of the holdings found by The Times would not need to be disclosed under the rules since they are not held in the name of the prime minister’s immediate family — his wife, son and daughter.

Eighty percent of the $2.7 billion in assets identified in The Times’s investigation and verified by the outside auditors were held by, among others, the prime minister’s mother, his younger brother, two brothers-in-law, a sister-in-law, daughter-in-law and the parents of his son’s wife, none of whom is subject to party disclosure rules.

But when Congress finally passed a bill cracking down on insider trading this year, it didn’t even cover the spouses of members of Congress and we’re exempting some Executive Branch members on national security grounds.

Maybe I’m being churlish. But I really wonder if such a superb article would come out to expose graft of our allies that got deposited into American banks. And I wish we saw more of this kind of reporting about our own corrupt elite.

In somewhat related news, Silvio Berlusconi got sentenced to four years for tax fraud today (though appeals will probably save him from jail time). And we still haven’t seen Mitt Romney’s tax returns.

Oversight and Investigation: “Why Should They Take You Seriously?”

Yves Smith has a post laying out one of the most troublesome aspects of the response to the revelation of foreclosure fraud. As she explains, to conduct an “independent review” of its PR-servicing “review” of its own servicing practices, GMAC picked the lawfirm that has been in charge of its national counsel on servicing issues.

A Birmingham, Alabama law firm, Bradley Arant Boult Cummings, has been GMAC’s national counsel on real estate servicing matters for some time (see here for examples of some of the matters it has handled).

Curiously, Bradley Arant is one of the firms that GMAC engaged to conduct an “independent review” after its use of robo signing became public:

GMAC Mortgage is initiating an independent review of foreclosures in all 50 states and examining foreclosure sales nationwide to ensure procedures and documentation are accurate….

The firms hired to conduct the review are Sullivan & Cromwell LLP, Bradley Arant Boult Cummings LLP, Morrison & Foerster LLP and PricewaterhouseCoopers LLP, said a person familiar with the matter.

Given Bradley Arant’s long-standing and extensive involvement in GMAC’s mortgage business, how can it legitimately be part of the team conducting the review? It’s incentives will be to minimize any problems, for a host of reasons, the most important being so as not to ruffle a big meal ticket and to avoid the exposure of any issues that might create liability for the firm.

[snip]

Bradley Arant is certain to frame its examination as narrowly as possible and not consider potentially troublesome but germane questions such as who at the contracting organizations (LPS, Fannie, other servicers) might also be culpable.A broader look is key to understand who really bears responsibility. Foreclosures of securitized loans increasingly look to be what Bill Black would call a criminogenic environment, in which the major perps are deeply entwined and work together. And if caught, it is clearly in their best interest to cut loose the weakest, most dispensable actor in their tidy group, the foreclosure mill.

So in many ways, the selection of Bradley Arant makes perfect sense. It is familiar with the terrain, so it will be able to issue a plausible-sounding report. It is also so deeply part of this questionable backwater that it is highly unlikely to make a bottoms up investigation and potentially rock the boat.

Couple the prospect of law firms involved in the fraud conducting “independent” investigations of their own fraud with this exchange from Thursday’s House Financial Services hearing on robo-signing. Maxine Waters asks the Acting Comptroller of the Currency, John Walsh, whether or not OCC (which regulates the big banks) has imposed any penalties on the servicers for their fraud.

Waters: I asked earlier about whether or not fines had been levied from the Treasury Department [see that exchange here]. Let me turn to the OCC. Since we started experiencing the fallout from the subprime boom, has OCC taken any enforcement actions against servicers?

[long pause]

Walsh: We have certainly issued supervisory requirements on them, matters requiring attention and other things to remedy–

Waters: Have you levied any fines?

Walsh: I do not believe that we have.

Waters: Have you issued any cease and desist orders?

Walsh: I don’t believe that there have been any public actions against them.

Waters: Have you threatened to revoke any charters?

Walsh: No.

Waters: Do you think that the servicers really believe that you mean business if they don’t have to fear any consequences?

Walsh: Well, I think the consequences are quite clear and present to them. I mean that we can compel action and the threat of more serious penalties–

Waters: But you haven’t done that. You haven’t done any of that! Why should they take you seriously?

Walsh: The supervisory process is one that happens–does not mainly happen in the public spotlight. It happens in the dealings directly with the institution through the process of examination, matters requiring attention, and other things. Only when a particular problem is identified that rises to the appropriate level do we get into the area–

Waters: Let’s talk about examiners. If you have examiners onsite, can you explain how you don’t know about all the problems that have recently come to light? What do the examiners do?

Walsh: There’s, as I mentioned, our attention was focused on the modification process, it would be quite unusual for us to be in the room or present at the point where an affidavit is being signed or a notarization is taking place. We do rely on the systems and controls of the financial institution, its own internal audit, or any flags that raise the issue, like our complaint function. And unfortunately those did not raise an alarm about this process. [my emphasis]

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Ashcroft on Waterboarding Prosecutions

I wanted to compare John Ashcroft’s testimony last year before the House Judiciary Committee to information that has come out in the IG Report to see how his veracity held up over time. The testimony is worth reading for his claims about what he did or did not know and/or meetings he did or did not attend (which are largely couched in claims that such information would be classified anyway so he couldn’t really tell us) and for his denial of knowing how the torture that took place before August 1, 2002 was authorized (again, couched behind claims to it being classified). One of the few admissions he made about problems with OLC is his limited confirmation that he opposed John Yoo’s appointment to head OLC because he was too close to the White House.

Aside from that, the most interesting exchange is one that seems to reinforce CIA’s claim in the IG Report regarding Ashcroft’s approval of excessive uses of waterboarding on July 29, 2003 (though as I’ll show, Ashcroft’s specific statement would avoid being a lie, perhaps by design; also the terms Ashcroft uses here may explain the nature of Goldsmith’s requested corrections).

First, Maxine Waters asks Ashcroft whether he learned any information that merited investigation. After nearly committing perjury–claiming he knew of no request for an investigation–he corrects himself and answers a different question–whether he learned anything that merited prosecution.

Ms. WATERS. I want to ask about, were there ever allegations of torture or other misconduct by U.S. personnel involved in interrogations that you, Mr. Ashcroft, considered to rise to the level as to justify a criminal investigation?

I understand there has been some discussion, but I am not clear whether or not you feel that there was information that emerged in these interrogations that really did rise to that level of a criminal investigation.

Mr. ASHCROFT. I’m not aware of any interrogation process that resulted in a request or in a situation that would have given rise to a basis for prosecution for torture.

Then Waters asks about the extent of Ashcroft’s knowledge of waterboarding (this exchange is characteristic of the way Ashcroft tried to both deny remembering how he learned this information and then couch it behind claims of classification).

Ms. WATERS. Where you ever aware that U.S. personnel were indeed involved with waterboarding?

Mr. ASHCROFT. I have been aware of that.

Ms. WATERS. How did you become aware of this?

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Maxine Waters: Is Goldman Sachs Going to Manage Our Toxic Waste?

Maxine Waters got into one key area of distrust on the bailouts: the ubiquity of Goldman Sachs in bailout plans.

Tim Geithner sure didn’t seem all that interested in Waters’ questions on the bailout.