Archive for October 4th, 2010
A surprisingly honest and thorough article regarding the foreclosure mess written by Peter J. Henning for the New York Times:
Home foreclosures may come to a sudden halt in some states because of problems in the documents filed in court as part of the process to take title to the properties. GMAC Mortgage, JPMorgan Chase and Bank of America have asked judges to stop legal proceedings while they determine whether proper procedures were followed, and it would not be a surprise if other mortgage lenders did the same while reviewing their actions.
The revelation that misstatements may have been made to court filings, and that mortgage documents might not have been as they were portrayed to be, raises potentially serious legal problems for the banks, mortgage processors and law firms that have been involved in the tidal wave of home foreclosures over the last three years. There are likely to be a wide range of government investigations and private litigation that could hound the banks and others for years to come.
In some states, foreclosing on a house requires a judicial proceeding, and it appears that affidavits and other documents filed with the courts contained misstatements regarding whether the mortgage file was reviewed by the person affirming the propriety of the foreclosure. Even in those states that do not require resorting to the courts to seize property when borrowers default on their home loans, it is likely that some filing must be made regarding the validity of the procedure, so improprieties may also crop up in other jurisdictions.
As the issues related to flaws in the foreclosure process come to light, even lenders unaffected by problems in pursuing foreclosures are moving more cautiously in dealing with borrowers in arrears.
Here are a few areas where there are likely to be legal developments related to potentially misleading documents and faulty mortgage foreclosures:
Government Investigations Any misstatements to a court in a foreclosure proceeding could result in the judge holding the party in contempt, and perhaps even referring the case for a perjury or obstruction of justice prosecution. Not surprisingly, judges do not take kindly to being misled, so any individual proceedings in which problems arise can result in the court imposing a sanction, such as dismissing the case.
On a larger scale, the various parties accused of misleading the court could be investigated for fraud if there is evidence of systematic action designed to improperly speed up the foreclosure process at the expense of the defaulting homeowners.
The potential breadth of the problem, involving multiple states and thousands of foreclosures, means that the Justice Department could initiate a grand jury investigation to look at how companies acted throughout the country. Mail and wire fraud are the most likely violations that would be considered, based on any misstatements in legal filings that were transmitted to courts. If the foreclosures involved loans guaranteed by the federal government, like programs administered by the Departments of Housing and Urban Development and Veterans Affairs, then the federal false statement statute, 18 U.S.C. § 1001, could come into play for any documents submitted to those agencies.
For this type of broad investigation, it would be better if the Justice Department coordinated a single inquiry rather than having United States attorney’s offices from around the country start issuing subpoenas for records. The Financial Fraud Enforcement Task Force created by President Obama would appear to be the most likely body to take control of the investigation at the initial stages so that it does not become fragmented or mired in inter-agency battles.
Because JPMorgan and Bank of America are public companies, I would not be surprised if the Securities and Exchange Commission were to open a civil investigation of their disclosures to investors about foreclosures and potential losses. The new S.E.C. whistle-blower program in the Dodd-Frank Act offers significant rewards to those who disclose information about securities fraud, and that may prove to be one avenue for gathering information from those involved in the foreclosure process who spotted alleged wrongdoing at companies.
Even if there is a coordinated federal investigation, the various state attorneys general are sure to get involved in scrutinizing how the banks and others conducted foreclosures in their states. Any number of criminal and civil statutes could be involved, such as false statement and consumer protection provisions.
Civil Suits The revelation of potential problems stretching across the foreclosure landscape means that civil suits against the parties to the process are inevitable. In individual foreclosure proceedings, homeowners would probably challenge any attempt to take title to the property, which may allow them to remain in their houses a while longer, or even stop the proceeding altogether.
On a larger scale, there are likely to be two potential classes of plaintiffs pursuing civil suits against the banks and others for their roles: first, homeowners who earlier lost their properties to foreclosure in which questionable documents were filed, and second, title insurance companies that may be on the hook for claims by purchasers of foreclosed properties who now have a cloud on the title to their house. Each may claim that the faulty documentation in the foreclosure cases caused them harm.
Normally these types of claims would be under state law for fraud, misrepresentation and civil conspiracy, but the cases could be brought in federal court under the Racketeer Influenced and Corrupt Organizations Act, better known as RICO. That statute, one of the few criminal provisions that authorizes civil suits in addition to criminal prosecution, makes it a violation in 18 U.S.C. § 1962(c) for any person to be associated with an “enterprise” who is involved “in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.”
In a RICO suit, the plaintiffs would probably allege that the banks, mortgage processors, law firms, and any other participants in the foreclosure process formed an informal enterprise known as an “association in fact,” which is really just a group acting together for a particular purpose. The “pattern of racketeering activity” could be alleged quite easily as mail and wire fraud, and as an alternative the plaintiffs could also assert that any faulty foreclosure proceedings constituted the “collection of an unlawful debt.”
The allure of civil RICO is that the potential liability for a violation includes triple damages and – music to any lawyer’s ears – payment of the plaintiff’s attorney’s fees, recoveries that are usually not available in state court actions. In addition, any state law claims, such as fraud, can be brought as part of the federal RICO suit under the doctrine of supplemental jurisdiction, allowing plaintiffs to bring the entire case in a single proceeding.
This year may go down as one marked by mass litigation, starting with the Toyota defect recall, moving on to the gulf oil spill, and now with the potential for broad claims against those involved in mortgage foreclosures. For the banks, mortgage processors, and law firms involved in the foreclosure process, their potential exposure is not yet clear, but they can expect to face legal battles on a number of fronts as this unfolds.
Peter J. Henning follows issues involving securities law and white-collar crime for DealBook’s White Collar Watch.
Who Owns The Media? The 6 Monolithic Corporations That Control Almost Everything We Watch, Hear And Read
Back in 1983, approximately 50 corporations controlled the vast majority of all news media in the United States. Today, ownership of the news media has been concentrated in the hands of just six incredibly powerful media corporations. These corporate behemoths control most of what we watch, hear and read every single day. They own television networks, cable channels, movie studios, newspapers, magazines, publishing houses, music labels and even many of our favorite websites. Sadly, most Americans don’t even stop to think about who is feeding them the endless hours of news and entertainment that they constantly ingest. Most Americans don’t really seem to care about who owns the media. But they should. The truth is that each of us is deeply influenced by the messages that are constantly being pounded into our heads by the mainstream media. The average American watches 153 hours of television a month. In fact, most Americans begin to feel physically uncomfortable if they go too long without watching or listening to something. Sadly, most Americans have become absolutely addicted to news and entertainment and the ownership of all that news and entertainment that we crave is being concentrated in fewer and fewer hands each year.
The six corporations that collectively control U.S. media today are Time Warner, Walt Disney, Viacom, Rupert Murdoch’s News Corp., CBS Corporation and NBC Universal. Together, the “big six” absolutely dominate news and entertainment in the United States. But even those areas of the media that the “big six” do not completely control are becoming increasingly concentrated. For example, Clear Channel now owns over 1000 radio stations across the United States. Companies like Google, Yahoo and Microsoft are increasingly dominating the Internet.
But it is the “big six” that are the biggest concerns. When you control what Americans watch, hear and read you gain a great deal of control over what they think. They don’t call it “programming” for nothing.
Back in 1983 it was bad enough that about 50 corporations dominated U.S. media. But since that time, power over the media has rapidly become concentrated in the hands of fewer and fewer people….
In 1983, fifty corporations dominated most of every mass medium and the biggest media merger in history was a $340 million deal. … [I]n 1987, the fifty companies had shrunk to twenty-nine. … [I]n 1990, the twenty-nine had shrunk to twenty three. … [I]n 1997, the biggest firms numbered ten and involved the $19 billion Disney-ABC deal, at the time the biggest media merger ever. … [In 2000] AOL Time Warner’s $350 billion merged corporation [was] more than 1,000 times larger [than the biggest deal of 1983].
–Ben H. Bagdikian, The Media Monopoly, Sixth Edition, (Beacon Press, 2000), pp. xx—xxi
Today, six colossal media giants tower over all the rest. Much of the information in the chart below comes from mediaowners.com. The chart below reveals only a small fraction of the media outlets that these six behemoths actually own….
Home Box Office (HBO)
Turner Broadcasting System, Inc.
Warner Bros. Entertainment Inc.
CW Network (partial ownership)
New Line Cinema
Time Warner Cable
ABC Television Network
Buena Vista Home Entertainment
Buena Vista Theatrical Productions
Buena Vista Records
Walt Disney Pictures
Pixar Animation Studios
Buena Vista Games
Paramount Home Entertainment
Black Entertainment Television (BET)
Country Music Television (CMT)
Nick at Nite
The Movie Channel
Dow Jones & Company, Inc.
Fox Television Stations
The New York Post
Fox Searchlight Pictures
Fox Business Network
Fox Kids Europe
Fox News Channel
Fox Sports Net
Fox Television Network
My Network TV
News Limited News
Phoenix InfoNews Channel
Phoenix Movies Channel
STAR TV India
STAR TV Taiwan
Times Higher Education Supplement Magazine
Times Literary Supplement Magazine
Times of London
20th Century Fox Home Entertainment
20th Century Fox International
20th Century Fox Studios
20th Century Fox Television
The Wall Street Journal
Fox Broadcasting Company
Fox Interactive Media
The National Geographic Channel
National Rugby League
Sky Radio Denmark
Sky Radio Germany
Sky Radio Netherlands
CBS Television Network
CBS Radio Inc. (130 stations)
CBS Consumer Products
CW Network (50% ownership)
Simon & Schuster (Pocket Books, Scribner)
Westwood One Radio Network
NBC Television Network
Syfy (Sci Fi Channel)
NBC Universal Television Distribution
NBC Universal Television Studio
Paxson Communications (partial ownership)
Universal Parks & Resorts
Universal Studio Home Video
These gigantic media corporations do not exist to objectively tell the truth to the American people. Rather, the primary purpose of their existence is to make money.
These gigantic media corporations are not going to do anything to threaten their relationships with their biggest advertisers (such as the largest pharmaceutical companies that literally spend billions on advertising), and one way or another these gigantic media corporations are always going to express the ideological viewpoints of their owners.
Fortunately, an increasing number of Americans are starting to wake up and are realizing that the mainstream media should not be trusted. According to a new poll just released by Gallup, the number of Americans that have little to no trust in the mainstream media (57%) is at an all-time high.
That is one reason why we have seen the alternative media experience such rapid growth over the past few years. The mainstream media has been losing credibility at a staggering rate, and Americans are starting to look elsewhere for the truth about what is really going on.
Do you think that anyone in the mainstream news would actually tell you that the Federal Reserve is bad for America or that we are facing a horrific derivatives bubble that could destroy the entire world financial system? Do you think that anyone in the mainstream media would actually tell you the truth about the deindustrialization of America or the truth about the voracious greed of Goldman Sachs?
Sure there are a few courageous reporters in the mainstream media that manage to slip a few stories past their corporate bosses from time to time, but in general there is a very clear understanding that there are simply certain things that you just do not say in the mainstream news.
But Americans are becoming increasingly hungry for the truth, and they are becoming increasingly dissatisfied with the dumbed down pablum that is passing as “hard hitting news” these days.
The status of the working and middle class American worker for fall 2010 – 42 percent of unemployed persons had been jobless for 27 weeks or more. Young workers have the highest unemployment rate on record at 19.1 percent.
There can be no sustained recovery without putting Americans back to work. We live in an odd time where GDP can be going up while middle class America is slowly dismantled. Let us be clear that the employment situation hasn’t improved. The recent job gains are largely part of the Census hiring that is now coming to an end. The housing market is still seeing record amount of foreclosures, bankruptcies are on the rise, yet banks are somehow turning profits. If we look at the length of unemployment for displaced workers we realize that our economy is undergoing a fundamental shift. Working and middle class Americans will have a harder time achieving and staying in the middle class than only one generation ago. Let us first examine the persistent issue of long-term unemployment:
42 percent of unemployed Americans have seen 27 weeks of being jobless or more. This is a modern record as a percentage. The little uptick on the chart above is largely based on people dropping out of the labor force completely. The private sector is having a tough time providing new jobs for these workers. The manufacturing industry that once was the backbone of our economy has been replaced by lower paying service sector work:
The top four industries that employ Americans barely pay a living wage. It is a commentary on our economic engine that manufacturing does not show up as one of the 10 largest occupations in the United States. The first big industry is retail sales followed by cashiers. When we look at our spending habits over the past decade, it is clear why Americans relied so heavily on debt to keep the illusion of a middle class lifestyle going. The charade had to come to an end and now many Americans are wondering what avenues are available to them if they ever wish to obtain a comfortable middle class lifestyle. If the recent Census report is any indication, it will become even more elusive for most Americans to even maintain what they currently have.
It should be no surprise that the two biggest sectors with long-term displaced workers are manufacturing and information. The displacement of American manufacturing is no new thing and has been occurring since the 1970s. The shift in the information sector ramped up after the technology bubble popped. So what two industries seem to be doing better in terms of long-term unemployed workers? Education/health services and financial activities. It is interesting that financial services, an industry that one would expect to have permanently contracted with the collapse with the credit bubble seems to be doing better here. A large part of this success of course has to do with the very generous bailouts that protected the Wall Street financial industry. The health service category should be no surprise given the aging demographics of our country.
The current unemployment rate for 16 to 24 year olds in America is 19.1 percent. You can only imagine what the underemployment rate is (30+ percent). This is a disturbing trend because research has shown that young workers that lag in terms of starting their career will never catch up financially to other cohorts. The fact that the unemployment rate is twice the rate of that in July of 2000 should be startling. The unemployment rate trend hasn’t really shifted even though the headlines state the economy stepped out of recession in the summer of 2009:
This is a troubling chart because what it shows is that Americans that become unemployed tend to stay unemployed for a longer duration than in past recessions. The chart hasn’t trended lower and until we see significant changes here, many Americans will feel as if they are deep in a recession. The stock market does not offer comfort to the millions out of work pondering how they will pay their bills. They are more concerned about finding a job instead of a too big to fail bank posting billion dollar profits on their speculative bets.
This crisis has hit across the country. Every state from December of 2008 to December of 2009 saw private sector job losses:
The current trend hasn’t reversed this. Most states are still near their troughs. We are in a holding pattern because of the trillions of dollars that went to the banks, some crumbs are falling to working and middle class Americans. Yet the bailouts were not evenly distributed:
Source: It Takes a Pillage, Billions of USD$
And some states seem to be doing better than others as well:
Until we can maintain steady employment growth across the country talk of a recovery rings hollow. Recent data showed that the median household income fell to $50,000 (a drop of $2000 from 2008 data). That won’t feel like a recovery to most. And with banks hoarding money and cutting access to credit for Americans there is no ability to pretend to be middle class anymore. Yet the dismantling of the middle class started in the 1970s and accelerated in 2000. The current unemployment rate doesn’t tell the entire story. 4 out of 10 Americans work in low paid service sector jobs. These people are counted as employed. In fact, many are part of the new class of “working poor” in America. 43 million Americans are in poverty as well. These are profound problems that we need to confront.
It was a big mistake focusing on the financial sector first as a method of getting the economy back on track. Three years later and the proof is in the job market. There is little point on trying to get jobs back on track with Wall Street banks still operating as they once did. What is the use of not systematically changing the system and adding jobs just so they can be lost in a few years when the next big bet fails and the taxpayer needs to bailout the banks again?
Now we have Fannie trying to prevent you from knowing that GMAC, another government company, has apparently engaged in “careless” affidavit processing despite being under court order not to at the time.
Yep, they asked for a protective order to prevent you from reading this.
Since it was denied, I’m going to make damn sure you can read it, and you should read it.
Since when is fraud upon the court not a matter of public interest, and why is our government trying to have evidence of outright fraud by private parties sealed?
About 100 London-based Goldman partners earned an unusual mid-year bonus of tens of millions of pounds in stock this August.
Goldman Sachs has secretly handed its top London-based employees tens of millions of pounds-worth of free shares following a decision to cap their pay in the wake of this year’s Labour Government tax on bank bonuses.
There are two issues here – how they got the bonuses and why. The bonuses represent an interesting compromise between Goldman, its partners, and the FSA.
Read the rest at BusinessInsider