The Rise of the Bankster Landlord

from truth-out

Wednesday, 23 July 2014 15:21By The Daily Take Team, The Thom Hartmann Program | Op-Ed

It's time to put an end to the financialization insanity that's hurting average people, destroying the American dream, and turning our economy into one big giant casino.

One of the most startling trends to come out of the wreckage of the 2007-2008 financial crisis is the explosion of Wall Street firms buying up and renting out property all across the country.

The housing glut and foreclosure crisis that was, for most Americans, the symbol of the devastation caused by the worst economic downturn of our lifetimes, was, for Wall Street a wonderful business opportunity.

A study from the Center for American Progress estimates that in the five plus years since the crash, "institutional investors [i.e. big banks and hedge funds] have... bought approximately 200,000 single-family homes at bargain prices and converted them into rental homes."

Amazingly, the New York City-based hedge fund The Blackstone Group has focused so much of its resources on the real estate business that is now the single largest landlord in the entire country.

Now, I've known many people over the years who've decided to become landlords. It's a smart financial decision, the kind that middle class people used to do all the time to help them boost their income. Renting out your first or second home is great way to earn some extra money, help pay the mortgage, or even make a living once you retire and no longer take home a paycheck.

But making a few extra bucks isn't why big banks and hedge funds are buying up thousands of houses every year. The real reason why they're so enthusiastic about throwing people out of their homes and flipping those houses into rental properties is that they want to repackage those properties and their rent payments into fancy financial products - remember derivatives? - that they can then sell to investors.

In other words, being a landlord is just another way for Blackstone Group and companies like it to make money with money. They don't produce anything at all, they don't add anything to our economy, they don't help any middle-class families, they just make money with money.

And given that that's all they do, it shouldn't be much of a surprise that, they're really, really bad at being landlords.

The activist coalition Housing For All recently surveyed hundreds of tenants living in Blackstone-owned properties in the Los Angeles area and what they found was startling.

Nearly half of the tenants surveyed said they had problems with their plumbing. Almost 40 percent said they had roach or insect infestation. Another 22 percent said they had issues with rodents or termites. A similar number of surveyed tenants said that had problems with heating, mold, and roof leaks.

All in all, not a pretty picture, and a picture made worse by the fact that only one in 10 Blackstone tenants said they had ever met a representative of their landlord in person.

While Blackstone gets rich repackaging homes into fancy financial products, the people who actually live in those homes suffer.

There have always been slumlords, but what we're seeing right now with Wall Street firms like Blackstone buying up home after home, renting them out, and then using rental payments as the basis for derivative securities is something new and totally dangerous.

The financial products Wall Street is creating with its new rental empire are basically a re-hashed version of the mortgage-backed securities that crashed our economy five years ago. There's a new bubble in the works, and if we're not careful, we could see another financial crisis sooner than you might think.

This is a perfect example of why we need to totally rethink the financialization of our economy.

Banks and financial institutions, especially regular, old-fashioned commercial banks, do have an important role to play in our economy. They facilitate commerce and help everyday people save and use their money through things like checking and savings accounts. In our economy, banks are supposed to provide that function.

There's even a place for Wall Street in our economy. When regulated and controlled, investment banking can provide opportunities for asset and investment growth that wouldn't otherwise exist.

But there's a huge difference between finance being just one part of our multifaceted economy and making it the dominant sector, as it is today.

There's also a difference between allowing Wall Street to play a small role in the banking industry and letting it control the industry, as Congress and President Bill Clinton allowed to happen by deregulating the big banks in 1999 and 2000.

We now live in a financialized country, and every part of our economy, whether it's the real estate market, the commodities market, or the manufacturing industry, is in thrall to the big banks and hedge funds on Wall Street.

This is insane -- it's a recipe for disaster.

That's why it's time to go back to what worked for decades before Wall Street took control of the banking industry and the economy.

It's time to make banking boring again by putting a firewall between good old-fashioned checking-account "commercial banks" and the "investment bank" gambling houses on Wall Street.

Not only will this bring sanity to the banking industry, it'll also bring sanity to our entire economy as well, by protecting us from whatever crazy scheme Wall Street comes up with next.

Let the investment banks gamble all they want.

Just keep the rest of us, and our houses, out of it. Bring back Glass-Steagal.

Copyright, Truthout. May not be reprinted without permission.

The Banksters’ Master Program For Manipulating Markets

from etfdailynews


July 28th, 2014

Jeff Nielson: Regular readers have heard the term “Hostage Markets” frequently in commentaries over the past year. However what has not been articulated during that time is the precise mechanism by which this total and complete control over all markets is achieved, except for a single commentary, written several years before readers were introduced to this label (and paradigm).

It all starts with the One Bank’s Pied Piper trading algorithm, what the propaganda machine calls “high-frequency trading”. It is a Master Algorithm which rules the trading (and traders) for anyone and everyone who use any of the “HFT” programs created by these Big Banks.

The Corporate media jabbers on extensively and exclusively about the speed of these automated trading programs. This is deliberate disinformation, to draw attention away from the obvious manipulative potential of these trading algorithms. It is inconceivable that our market “regulators” could not be aware of this manipulative potential, more strong evidence of the endemic corruption of these so-called regulators.

What makes this the perfect time to explain the Master Algorithm (and its manipulation) to readers is a report which has just surfaced concerning a new, class-action law suit against the Chicago Mercantile Exchange. The evidence which the plaintiffs claim to possess would not only conclusively establish the existence of this Master Algorithm, but they also claim to have “secret witnesses”, prepared to provide insider, smoking-gun evidence about this trading-algorithm manipulation.

[Case citation:  U.S. District Court for the Northern District of Illinois. Civil Docket #: 1:14-cv-02646 William Charles Braman, Mark Mendelson and John Simms v. Chicago Mercantile Exchange]

What is the nature of this “evidence”? Nothing less than the claim that 50% of the 12 million “contracts” (i.e. trades) each day at the Chicago Mercantile Exchange are simply phony (and illegal) “wash trades”. Six million phony and illegal trades are alleged to be generated each day at the CME to bludgeon all of the world’s commodities markets in whatever direction the OneBank desires.

This amounts to somewhere around 2 BILLION phony/illegal trades per year. In order for readers to understand the true, monstrous scale of such market-manipulation; let’s compare it to what the Corporate media is calling a “massive trading scheme”, also based upon phony/illegal “wash trades”, and also conducted in the commodities markets of the CME.

The bank involved was the Royal Bank of Canada, and the “massive trading scheme” involved mere“hundreds of transactions”. In comparison, the illegal market manipulation alleged in the law suit against the CME is millions of times larger than the alleged, RBC “massive trading scheme” (i.e. seven orders of magnitude). That is massive.

In fact; it’s so massive that no entity other than a “one bank” could possibly perpetrate a market-manipulation operation this large. RBC is (by itself) a Big Bank. Only the One Bank could perpetrate a market fraud more than a million times larger than an identical form of that fraud, perpetrated by one of the world’s “Big Banks”.

Understand that the sheer volume of this phony trading would be – by itself – conclusive proof of not only the existence of this Master Algorithm, but also its overwhelmingly dominant influence on markets. It makes no sense for one entity to be generating six million phony trades per day at the CME unless all those phony trades are controlled by a single computer program. Otherwise, competing programs would cancel-out each other, reducing the One Bank’s capability to manipulate markets.

However, even the perfect trading algorithm could not create Hostage Markets – by itself. The second, integral component is a Corporate media oligopoly, broadcasting a single message of propaganda: our so-called “economic news”. It is only through the combination of these two ingredients that Hostage Markets can be produced.

Why? Because algorithms simply process data. In a sane, legitimate society, with a (genuine) “free press”; the business media is generally a cacophony, and thus so is the economic reporting. Occasionally (generally at times of dramatic events) there is near-unanimity of opinion amongst a free press, but the rest of the time there is a spectrum of opinions – reflecting the contrarian nature of the human species. In such a legitimate society; a trading algorithm would have only marginal/infrequent manipulative capacity

The absence of this cacophony, and the appearance of a monolithic herd – which drones precisely the same message, day after day – is conclusive proof, by itself that we no longer have a “free press”. Rather, we effectively have a media-monopoly (ruled by a single banking cabal) with an obvious agenda: total control of all the world’s markets.

It is only through producing this single, clean “message” day after day, which maximizes the manipulative potential of these trading algorithms, that a master trading algorithm can exert complete control over markets, 24/7. As with most of the One Bank’s financial mega-crimes; this systematic, endemic market-manipulation is achieved through brute force.

First the master trading algorithm is distributed to all of the One Bank’s Big Bank tentacles. Likely each Big Bank as their own, different name for the Master Algorithm, so that the One Bank’s minions employed at these tentacles are (supposedly) unaware of the systemic manipulation taking place.

All they know is that their trading algorithm has an incredible, impossible rate of success in producing “winning trades”. How impossible? At one point the arrogant Lloyd Blankfein of Goldman Sachs boasted that his traders had produced 90 consecutive days of “winning trades”, a statistically impossible feat – in honest markets.

Belatedly, the One Bank realized that it was not a good idea for its Big Bank tentacles to boast about winning their bets every day with their market-rigging, because even the brain-dead Sheep would (eventually) begin to realize that “something fishy” was going on. So, since that time, the Corporate media has explicitly pointed out that occasionally these Big Bank tentacles lose on their serial, mega-gambling in markets.

Other (greedy) traders/companies in the marketplace see this impossible success rate, and so they obtain “their own” trading algorithms, again unaware that all of these algorithms are simply versions of the one, Master Algorithm. The more traders who (unknowingly) enlist in the One Bank’s trading army, the larger and more-potent the legions (and the manipulation) grow.

Meanwhile, by sending one, single, overwhelmingly dominant data-stream from the Corporate media each day for the Master Algorithm to process, this ensures maximum potency – i.e. maximum manipulative potential. The actual manipulation itself is achieved in two ways.

First, as all regular readers know, our “business news” and “economic statistics” are heavily-doctored to suit the agenda of the One Bank, which is simply to manipulate markets in the desired direction. Naturally, the One Bank’s minions are (subtly) informed in advance which way the Corporate media’s so-called news will be moving the markets – enabling those traders to “win their bets” with that impossible rate of success.

In most markets; this means marching them up and down, as such yo-yo trading patterns allow the One Bank’s criminal traders to maximize their ill-gotten gains. However; in the silver and gold markets, there is a more-overriding agenda: permanent price-suppression. But more will be said about that (and how it connects to the Master Algorithm) in an upcoming commentary.

For now; what readers need to realize is that these “2 billion” phony/illegal wash trades only relate to the One Bank’s manipulation of commodity markets. How many billions of phony/illegal trades does this Master Algorithm create to manipulate U.S. equity markets? How many billions of phony/illegal trades does the Master Algorithm create to manipulate the markets of London, and the rest of Europe?

Then there are the sovereign bond markets, and corporate debt markets, and we can’t forget the “derivatives market”; a private, unregulated, rigged casino, somewhere in excess of 20 times the size of the entire global economy. All of these markets are now dominated by the One Bank’s, Pied Piper “HFT trading” – and thus its Master Algorithm.

One computer program, operated by One Bank, generating billions and billions of phony trades each year in markets around the world, requiring countless $trillions in dirty money just to fund such an operation: manipulating all the world’s markets. Each day more evidence emerges to both prove the existence of this one, obscenely-gigantic financial crime syndicate – and the unprecedented mega-crimes it commits on a daily basis.

This article is brought to you courtesy of Jeff Nielson From Bullion Bulls Canada.

WHAT IS AMERICA ABOUT ANYMORE?

from  skyvalleychronicle.com

The U.S. spends billions bailing out Wall Street banksters and leaves working class citizens who need help twisting in the wind July 15, 2014

News & Opinion by Katherine McFate

(NATIONAL) -- Meet Mark. He’s a 58 year old, college-educated veteran who lives in Oregon.

He was laid off last September and has been unable to find work since. Mark’s state unemployment benefits ran out in May. 

Since funding for the federal Emergency Unemployment Compensation program was cut last December, Mark and more than three million other Americans, including nearly 300,000 veterans, have been denied access to a second six months of support — a vital financial lifeline in this tough economy. Mark is way behind in his rent, is selling everything of value he owns, and fears he will be homeless soon.

“We spend trillions bailing out banks, and provide Wall Street bonuses for those that created this challenging economy, but for a highly skilled worker, a veteran with a family, this country has nothing,” writes Mark. “What is this country about anymore? Our military service personnel risk their lives to save and protect the freedoms of our country and this land, but when we need help there isn’t enough?”

My organization, the Center for Effective Government, is collecting stories from people like Mark reporting how the loss of emergency unemployment benefits is wrecking their lives. 

Unemployment benefits only provide about $300 a week, barely enough for the rent or mortgage in many places, but it keeps the utilities on, pays for a phone, gas money, and an internet connection — so the job search can continue. 

Employers won’t hire someone without an address and phone number.

The stories follow a common trajectory.

First, families drain their savings. Then, their retirement accounts to keep paying rent or the mortgage. 

That’s followed by resorting to credit card debt to buy food, keep the phone and utilities on, and pay for gas money.

As families become more desperate, they start selling their possessions and move in with friends and relatives, if they have that option.

Some families end up sleeping in tents and cars, leaving parents to worry that the authorities will take away their children until they’re back on their feet.

Almost all our stories end with some version of Mark’s question, especially the stories from veterans: 

What is this country about anymore? 

They feel betrayed by elected officials who put partisan politics above their needs, betrayed by the nation that ignores their plight.

In April, the Senate passed a retroactive extension of emergency unemployment assistance. House leaders refused to allow a vote on the bill, so it expired.

A more modest proposal has emerged: It would provide assistance to those who apply for emergency aid in the future. It would provide no retroactive relief to the millions of workers who have exhausted their resources as they continue to search for work.

But those jobless Americans need retroactive benefits to catch up on the rent and pay off their credit card debt.

It looks like this bipartisan new bill co-sponsored by Reps. Dan Kildee (D-MI) and Frank LoBiondo (R-NJ) could garner a House majority. That would mark a step forward.

But this “half a loaf” won’t be enough to stabilize the lives of the millions of Americans who worked hard, played by the rules, took care of their families, and have been felled by a poor economy.

Let’s all ask ourselves: “What is this country about anymore?” 

What country allows almost 300,000 unemployed veterans and their families (and another 2.9 million Americans) to sink into poverty?

The Declaration of Independence begins by asserting our right to “life, liberty and the pursuit of happiness.” For the long-term unemployed, the ending may be more relevant: “we mutually pledge to each other our lives, our fortunes, and our sacred honor.”

The pledge to support and protect each other captures the essence of patriotism. We need to open our hearts to our neighbors and honor our common humanity by extending a hand to our fellow Americans as they struggle to navigate our tough economy.


Katherine McFate is the President and CEO of the Center for Effective Government, a nonprofit public interest organization. This report was originally published at OtherWords.org and is reprinted here with permission.

Letter to Press

Letter to Press

7-21-2014



July 18, 2014

Letter to Press:

Dear Editor and fellow American:

For over 12 years I have fought for a judicial hearing or trial to make a Wall Street Banker, Chase Manhattan, and their perfidious service agent, Ocwen Federal Bank FSB, face justice in a court of law for undeniable violations of federal bankruptcy law, which cost my family home of 26 years in Corona California  and my home based business, Residential Fire Sprinklers, operated from that home since leaving Microsoft in 1991.

I had two attorneys fighting for me but when my money ran out, I had to continue to fight, pro-se, or give up.  I have appealed through the federal legal hierarchy three times all they way to the US Supreme Court. It is incredible to me, that judicial eyes from the Bankruptcy Court, the Bankruptcy Appellate Panel for the 9th circuit, the US District Court, the US Court of Appeals for the 9th Circuit, and the United States Supreme Court  apparently did not see anything wrong, with the actions of these banksters, and turned a blind eye, to these unlawful actions, three times!  And remember, this is just to gain a hearing or trial to present the facts of my case. The violation is undeniable and the law is settled, but you have to get them in court, I need the court to order a trial. 

My story does have the properties of a 'man bites dog' story in that the judicial system, charged with upholding law, has been the invisible wall, keeping the guilty out of court, and denying me my day in court.  It's the court that has stymied my pursuit of justice by denying me a hearing.  The judge from the bankruptcy court ruled she lacked jurisdiction after my case was dismissed, so jurisdiction has been the legal hot potato, that causes all the courts to summarily dismiss my case. My fourth opening brief, submitted to the 9th Circuit can be found on my blog page www.garyo.info

I don't know if my story is newsworthy or not, but if I am rejected for a hearing again, for a fourth time, by the 9th Circuit, It will definitely be newsworthy for every American who values the rule of law. 

Gary Ozenne

firesprinklers@gmail.com
951-496-7525

July 18, 2014  

The Continuing Saga of Bankster Fraud

from wallstreetpit.com


By L. Randall Wray Jul 19, 2014, 12:24 PM

Here’s another story in the continuing saga of Bankster fraud.

As I’ve argued since 2008, it is likely that all—or nearly all–of the residential mortgage backed securities (RMBSs) are fraudulent. The Banksters engaged in fraud at every link in the RMBS food chain.

They defrauded the borrowers. They forced the appraisers to commit fraud (pressured them to overvalue property). They conspired with ratings agencies to overvalue the RMBSs. They created MERS to destroy property records and to cheat local governments out of recording fees. They separated the promissory notes from the deed of trust, invalidating the lien. They hired BurgerKing Robo-signers to create forged documents. They lie in court, committing perjury. They steal homes from owners who don’t even have mortgages. And on, and on, and on. Their depravity knows no bounds.

But here’s an entertaining story. Bear with me, it is a bit complicated.

The mortgages were originated by specialized mortgage brokers, thrifts, and banks. They would be bought and sold among banks maybe ten times before going through securitization (this was one of the reasons MERS was created—to reduce the costs of the buying&selling by avoiding recording fees; it was also a source of confusion because a bank would sometimes sell the same mortgage to several different buyers).

In the securitization process, a Trustee bank would be appointed. Almost all of these securitizations were done in New York because it had strict laws—this provided a patina of respectability. The Trustee would certify that it actually had all the docs related to the mortgages. In fact, it looks like they usually had none of them.

In turn, the selling bank would certify that the mortgages met the “reps and warranties” regarding quality. In fact, as I reported last time, whistle-blower Richard Bowen at Citi discovered that 60% of the mortgages did not.

Trustees are supposed to ensure the bank’s certification is valid; they are also responsible for monitoring servicing rights and enforcing servicing obligations. In short, they protect the investors in the RMBSs.

By 2006, insiders knew that the whole RMBS market was going to hell in a hand-basket. Things were so bad that even the Fed (usually clueless) discussed the exploding numbers of defaults. (We know that because transcripts from that period have now been released. See here.) As I reported before, the transcripts reveal the following extraordinary statement by Gov Bies:

“Part of what’s amazing in all of this is that in 2004 and 2006, particularly toward the end of that period, purchase money seconds, by which people borrowed the downpayments for homes, were a big part of mortgage financing… The one sector that has had a jump in delinquencies is subprime ARMs, and clearly the jump is related to rates that have already reset. We’ve got more to come. One thing I’m hearing more from some folks who have been investing in mortgage-backed securities and maybe in some CDOs (collateralized debt obligations), where they’ve been tranched into riskier positions through economic leverage, is the realization that a lot of the private mortgages that have been securitized during the past few years really do have much more risk than the investors have been focusing on… We’re seeing that some of the private-label mortgage-backed securities are having very high early default rates or delinquencies in the mortgages, which usually means that the originator has to buy them back out of the pools. There isn’t a whole lot of transparency in the disclosures around some of these bonds, and some of the brokers are underwriting products that have very high early default rates, which is something that investors are starting to focus on. As more products are generated outside the banking sector, they get funneled to pools through broker-dealers as opposed to the banks. I think that we’re missing a level of due diligence regarding brokers, who may not be doing a good job. As you all know, the fraud rate on mortgages has tripled in the past two years. So I think we could see noise in some of the mortgage-backed private deals and some of the riskier CDO economic leverage positions….”

Yep. As we all know, buyers are borrowing their downpayments, risks are higher than investors thought, early defaults are rising, and the fraud rate has tripled! This is 2006.

The investors in RMBSs began to demand that their Trustee banks look into mortgage quality, suspecting the mortgages did not meet the Reps&Warranties. The Trustee banks, however, were “conflicted”. They needed the goodwill of the banks that were originating and selling trashy mortgages.

All the banksters—originators, securitizers, trustees—were making so much money hand-over-fist by originating and selling and securitizing trash assets that no one wanted to stop.

Sure, they knew the whole thing would blow up, but meantime, they had to make as much money as possible “while the music was playing”. They hoped to be retired, having sold all the trash to clueless investors before the music stopped.

So the Trustee banks ignored the pleading of the investors in the RMBSs. They had a choice: sue or be sued, and chose to wait it out, dancing to the music.

They’ve been ignoring their investors ever since—as the investors lost money on the securities.

Recently, a funny thing happened. The NY Supreme Court ruled that a six year statute of limitations holds—the Banksters who lied about the quality of the trash they securitized cannot be sued after six years.

A group of the biggest investors, including PIMCO and BlackRock, filed a $250 Billion lawsuit against the biggest Trustee banks: Bank of NY-Mellon, USBank, Wells Fargo, Citibank, Deutsche Bank, and HSBC.

Two-hundred and fifty BILLION smackaroos dwarfs Eric Holder’s tiny little $7B settlement against Citi.

It gets funnier. The Trustee banks are now quickly filing lawsuits against their brethren banks for the false reps and warranties.

So now the Trustee banks are suing and being sued!

The Trustees might be able to get off if they can prove the issuing banks breached the reps & warranties, but cannot evade their own gross negligence, bad faith, and misconduct. We know, for example, that they lied about having the mortgage docs. MERS broke the chain of title and destroyed most docs—even recommending that the paper docs should be shredded—so there is no way that the Trustees had them.

See an excellent article on the lawsuit here. According to Isaac Gradman, typical judgments in such cases run at about 75% of losses. The investors have claimed $250 Billion in losses, so a judgment could be $200 Billion. That might be big enough to take a bite out of crime. (However, Gradman notes that PIMCO and BlackRock might settle for much less.)

Others have joined suit, including banks, credit unions, insurance companies and the FHLB of Topeka.

This is just the tip of the iceberg.

MERS recorded 65 million mortgages. There is $10 Trillion (with a T) of mortgage debt of which $7 Trillion (another T) were securitized. The whole sector is riddled with fraud.

The fun will continue for years.

Meanwhile, US property records are in disarray. Banksters continue to steal homes. Real estate markets are turning down. And it looks like the economy is beginning to slow.

Looks like déjà vu all over again

Why Do Banksters Get Help but Not Homeowners?

from opednews.com



By Thom Hartmann (about the author)   





The once almighty Citigroup is now getting a third lifeline from the U.S. Treasury.
(image by YouTube)

It's time to start helping the people, and stop helping Wall Street.

According to an agreement announced earlier today, big bank Citigroup will pay $7 billion to settle a Department of Justice investigation into that bank's involvement with risky subprime mortgages.
The agreement stems from Citigroup's role in the trading of subprime mortgage securities, which helped to cause the 2007 financial collapse and Great Recession.
Of the $7 billion total settlement, $4 billion will be in the form of a civil monetary payment to the Department of Justice, $500 million will go to state attorney's general and the Federal Deposit Insurance Corporation, and an additional $2.5 billion will go towards "consumer relief."
But make no mistake about it. This agreement is another win for the big banks.
Under the agreement, Citigroup will most likely get a $500 million tax write-off. And in pre-market trading on Monday, Citigroup stocks rose by nearly 4 percent, despite the $7 billion agreement.
This is nothing more than a slap on the wrist for Citigroup; basically a cost of doing business.

And as for the mere $2.5 billion in consumer relief, while it will be going towards loan modifications, principal reduction and refinancing for distressed homeowners, it's nowhere near enough. And there are no guarantees it will make its way into the hands of the people Citigroup victimized, either.

If the Department of Justice was serious about holding Citigroup accountable for its actions, and helping the American people and economy recover from the Great Recession, then it would be taking a heck of a lot more than $7 billion, and giving that money directly to the American people.
It would be helping out American homeowners, instead of continuing to protect the big banks.

After all, it's consumers buying things like houses who drive demand and grow the economy. Not the big banks on Wall Street.

Directly helping out American homeowners after a crisis isn't some sort of radical idea or new thing we have to look at Sweden or Iceland to figure out, either.

We've done this sort of thing before, right here in the United States, and it worked very well.
Back in 1933, in the wake of the Great Depression, FDR signed into law the Home Owners' Loan Act of 1933, which created the Home Owners' Loan Corporation (HOLC).
The HOLC's main goal was to help refinance home mortgages that were in default or at risk of foreclosure because of the 1929 stock market crash and the previous collapse of the housing industry.

It did that by buying up old mortgages from the banks using government bonds -- borrowed money.

In a statement released after the act was signed into law, FDR said that, "In signing the 'Home Owners Loan Act of 1933,' I feel that we have taken another important step toward the ending of deflation which was rapidly depriving many millions of farm and home owners from the title and equity to their property."

By the mid-1930's, the HOLC had helped to refinance nearly 20 percent of urban homes in America.

And by 1936, the final year that the HOLC was buying mortgages, it had helped to provide Americans with over one million new mortgages, and had loaned out nearly $750 billion in today's dollars.

That's right; $750 billion in today's dollars. That makes the $2.5 billion from the Citigroup agreement going towards consumer relief seem like nothing.

To this day, the HOLC is credited with relieving the financial burdens of millions of Americans, and helping to right the American economy.

If we're serious about rebuilding the American economy, and helping out the millions of Americans who still struggle to keep a roof over their heads, then we need to be doing a lot more than just forcing one bank to handle $2.5 billion in consumer relief and trusting the bank to distribute it responsibly.

We need to stop caring so much about the well-being of Wall Street, and start caring about the American people and economy.

No American should have to go to bed tonight worrying if they're going to become homeless tomorrow.

http://www.thomhartmann.com

Citigroup to Pay $7 Billion to Resolve Mortgage Probe

from wsj

Settlement Includes $4 Billion Civil Penalty, $2.5 Billion in 'Consumer Relief'

By 

 CHRISTINA REXRODE And 

 

ANDREW GROSSMAN 

 CONNECT

Updated July 14, 2014 10:58 a.m. ET

According to the U.S. Justice Department, Citigroup knowingly sold mortgage-backed securities with loans that contained "material defects." Associated Press

Citigroup Inc. C +3.62% will pay $7 billion to settle the U.S. government's accusations that it misled investors about the quality of mortgage securities it sold in the run-up to the financial crisis.

According to the Justice Department, Citigroup knowingly sold mortgage-backed securities with loans that contained "material defects" and concealed that information from investors in what Attorney General Eric Holder described as "egregious" misconduct that helped fuel the 2008 financial crisis.

Citigroup admitted to many of its misdeeds "in great detail" the Justice Department said Monday. A statement of facts released by the government—and agreed to by the bank--detailed a pattern of Citigroup repeatedly ignoring its own red flags about sub-par mortgages and making misrepresentations to investors about the quality of loans being securitized.

Attorney General Eric Holder announces that Citigroup will pay $7 billion in a settlement with the U.S. Justice Department for misdeeds in 2008. Photo: Getty

On several occasions, bank employees learned that significant percentages of mortgage loans reviewed were defective but sold them to investors anyway. One Citigroup trader, in an internal email cited by the government, stated the bank "should start praying" because so many of the loans were likely to go sour. "It's amazing that some of these loans were closed at all," the email stated.

Despite those concerns, Citigroup pooled those loans into residential-mortgage backed securities that were sold to investors.

"The bank's activities contributed mightily to the financial crisis that devastated our economy in 2008," Mr. Holder said. "Taken together, we believe the size and scope of this resolution goes beyond what could be considered the mere cost of doing business."

The settlement doesn't absolve Citigroup or its employees from facing any possible criminal charges, the Justice Department said.

In a call with reporters Monday morning, Citigroup Chief Financial Officer John Gerspach declined to comment on whether the bank had asked for release from any potential criminal charges as part of the settlement.

Read the Settlement Documents

• Settlement Agreement
• Statement of Facts
• Consumer Relief
• List of Securitizations
• Settlement Appendix: Deal Details

Related Coverage

• Citigroup Posts Weaker Results (July 14)
• Holder to Cite Citigroup's 'Egregious' Misconduct in Settlement (July 14)
• Behind the Scenes of Citigroup's $7 Billion Settlement (July 13)
• 5 Things to Watch in Citi's Earnings (July 11)
• A Difficult Quarter Again Seen for Banks(July 10)
• Bank Trading Revenue May Improve in Second Quarter (July 10)
• Legal Cloud Dims Citi Lights (July 9)
• Citi Says Signs of Mexico Fraud Weren't Escalated (May 29)
• Fed Kills Citi Plan to Pay Investors (March 26)

"We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not the past," said Citigroup Chief Executive Officer Michael Corbat in a statement.

In its settlement, Citigroup will pay a $4 billion civil penalty to the Justice Department, plus $500 million to the Federal Deposit Insurance Corp. and several states. Citigroup also agreed to spend $2.5 billion on "consumer relief," where it will get credit for modifying mortgages for struggling homeowners and similar actions.

The pending settlement and other legal problems have been an overhang for the bank. Citigroup's penalty, unlike a similar settlement between the Justice Department and J.P. Morgan ChaseJPM +1.51% & Co. in November, releases it from potential liability for CDOs, or collateralized debt obligations, not just mortgage securities. The settlement covers residential mortgage-backed securities and CDOs issued in the run-up to the financial crisis, from 2003 to 2008.

The bank has "now resolved substantially all of our legacy RMBS and CDO litigation," Mr. Corbat said in his statement.

Citigroup also released its second-quarter earnings Monday, with the bank disclosing its profit dropped 96% in the quarter thanks in part to a pretax charge of about $3.8 billion related to the settlement. Still, the company's earnings came in better than analysts' expectations.

Citigroup's $7 billion agreement comes after a long negotiation. The bank in May had opened with an offer to pay $363 million in cash, plus more for "consumer relief," or money the bank will set aside to help customers in financial trouble. The Justice Department came back with a far higher number: $12 billion, including consumer relief.

The bank had argued that it shouldn't have to pay so much because it was a relatively small player in the mortgage-securities market. But the Justice Department lawyers saw Citigroup's conduct as so egregious that it merited a high penalty.

At one point in mid-June, the government came to within a day of filing a lawsuit against the bank.

Citigroup is the second of the U.S. megabanks to settle with the government over mortgage securities. J.P. Morgan settled similar charges in November for $13 billion. Talks between the government and Bank of America Corp. are under way.

The negotiations were seen as a flash point for both Mr. Corbat, who was given the top job in 2012 with a mandate to improve relations with the government, and for Mr. Holder, who has faced constant criticism that his Justice Department has been too soft on banks.

In May, the Justice Department extracted from Swiss bank Credit Suisse Group AG its first guilty plea from a major financial institution in two decades, and French bank BNP Paribas SA pleaded guilty last week to charges over its dealings with countries sanctioned by the U.S.

It has been a tough year for Citigroup so far. In February it disclosed an alleged accounting fraud against its Mexico unit. In March the Federal Reserve rejected its stress-test request for a higher dividend and share buyback, citing a need for the bank to improve its overall risk managements systems.

Write to Christina Rexrode at christina.rexrode@wsj.com and Andrew Grossman atandrew.grossman@wsj.com