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Archive for the ‘Securities and Exchange Commission’ Category

The always behind-the-curve Fed seeks to fine mortgage servicersfor unsafe practices and robo-signing with an amount dependent on allegedly independent review by consultants.

Federal Reserve Governor Sarah Bloom Raskin on Saturday said the Fed must impose monetary penalties on banks who entered into an April agreement with regulators over how to fix problems in their mortgage servicing businesses.

“The Federal Reserve and other federal regulators must impose penalties for deficiencies that resulted in unsafe and unsound practices or violations of federal law,” Raskin said in remarks prepared for delivery to the Association of American Law Schools. “The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties.”

In April, 14 mortgage servicers, including Bank of America and JPMorgan Chase entered into a settlement with the Fed, the Office of the Comptroller of the Currency and the now defunct Office of Thrift Supervision on steps that have to be taken to correct and improve their servicing practices, such as providing borrowers with a single point of contact for questions.

As part of the agreement, these mortgage servicers have hired consultants to review foreclosures that took place in 2009 and 2010 to see if any were improper.
Regulators have said these reviews will help determine the size of any penalties the servicers will have to pay.

Expect Trivial Penalties, Spread a Mile Wide

Don’t expect this announcement to amount to much of anything. Penalties, if any will be trivial and the fines are nearly guaranteed to not benefit those harmed in any substantial way. Instead, expect fines to be spread out to include those not harmed at all.

Another Whitewashing Move by the SEC

Similarly, don’t expect much of anything from this feeble announcement: SEC to demand admission of wrongdoing in some cases

Securities regulators will no longer let companies settle civil cases without admitting or denying the charges if they have already admitted wrongdoing in parallel criminal cases.

The policy change, announced by Securities and Exchange Commission Enforcement Director Robert Khuzami on Friday, applies only to instances where a defendant has already admitted to violating criminal laws.

It comes just over a month after a federal judge in New York rejected a proposed $285 million settlement between the SEC and Citigroup, in part because the bank had not admitted to wrongdoing. However, in that case, no parallel criminal charges have been filed.

It seemed “unnecessary” for the SEC to include its traditional “neither admit nor deny” approach if a defendant had already been criminally convicted of the same conduct, Khuzami said.

In one of the most egregious examples, Bernard Madoff pleaded guilty for his role in a multi-billion dollar Ponzi scheme in 2009, but neither admitted nor denied the allegations in a settlement with the SEC.

In rejecting the Citigroup accord, U.S. District Judge Jed Rakoff said the SEC’s failure to require Citigroup to admit or deny its charges left him with no way to know whether the settlement was fair. Rakoff also called the $285 million payout “pocket change” for the third-largest U.S. bank.

The Citigroup settlement was intended to resolve charges that the firm sold risky mortgage-linked securities in 2007 without telling investors that it was betting against the debt.

“My take on things is it is all about managing the press,” said James Cox, a professor at Duke Law School. The agency “looked pretty silly before Judge Rakoff the other day,” he said.

This policy “non-change” borders on the absurd. The ruling only applies to only to instances where a defendant has already admitted to violating criminal laws. Notice that the ruling does not even apply to the Citigroup case in which a Judge Blasted  the the SEC.

“Doesn’t the S.E.C. have an interest in what the truth is?” Judge Rakoff asked, in reference to the commission’s longstanding practice of not forcing a defendant to admit any wrongdoing when settling a case.

Judge Rakoff called the contempt power — a judge’s ability to punish a party for disobeying a court order — “the backbone of the judiciary.” He questioned whether the S.E.C. was really serious about ever seeking an injunction against repeat offenders.

“It’s just for show,” Judge Rakoff said.

“We’re not saying that we will never use injunctive relief,” said the S.E.C. lawyer.

“Hope springs eternal,” the judge replied.

The S.E.C.’s current enforcement action against Citigroup is at least the fifth time that the commission has reached a settlement with the bank related to civil fraud accusations.

SEC Fine vs. Citigroup Gain

Please consider SEC Tired of Fighting Big Banks-Calls Federal Judge Rakoff Refusal to Approve Citigroup Settlement-Shortsighted.

Estimates are that Citigroup made a $3.8 billion profit from the bogus investment portfolio.  The investors lost over $700 million.  The $285 million offer to settle is a joke.  The Judge made clear he would not allow corporations to continue to buy their way out of fraud from “a cost of doing business” fund.  The Judge demands the truth to be revealed and the public protected.

Public service is a public trust.  Federal employees have a duty to protect the public interest.  Apparently, the SEC forgot their duties and the fact that the Court is the final arbiter.  The legal team at the SEC that crafted the Citigroup deal need to remember they are federal service not bank employees.  It’s refreshing to see Judge Rakoff remind government workers who employs them.  show.php?db=special&id=138

Rakoff’s words to the SEC and big banks has been globally hailed as public policy genius.  Thank you Judge Rakoff.The trial is scheduled for July 16, 2012.

While essentially ignoring billions of dollars in repeated fraud allegations against Citigroup, the SEC brought full weight down on Martha Stewart over (drum roll please) … $45,673.

Martha Stewart went to prison and was fined $30,000. Since then, no one has gone to prison or even been criminally indicted in $trillions of dollars of fraud in the global financial crisis. And unless someone does admit criminal action, the SEC reserves the right to do more whitewashing without seeking admission of guilt.

Mike  “Mish”  Shedlock – Global Economic Analysis

There’s one folks.  Just one.

NEW YORK — A federal judge Wednesday challenged the SEC’s plan to settle a fraud case against Citigroup for $285 million, saying that the deal would recoup only a fraction of investors’ losses and would leave the firm free to proclaim its innocence in private lawsuits over the remaining damages.

The judge used the Citigroup case to mock the SEC’s traditional way of doing business — allowing defendants to settle without admitting or denying wrongdoing.

The unproven allegations, U.S. District Court Judge Jed S. Rakoff said, “are no better than rumor or gossip.”

“Does not the SEC of all agencies have an interest in establishing what the truth is?” Rakoff asked.

Well yes, it should.  But it doesn’t.  And here’s the real problem: This isn’t the first offense.

In fact Citi has already promised not to do it again many years ago.  And yet they did it again.  This is not unique; let’s remember NY Fed board member Kindler

New York-based Pfizer agreed to pay $430 million in criminal fines and civil penalties, and the company’s lawyers assured Loucks and three other prosecutors that Pfizer and its units would stop promoting drugs for unauthorized purposes.

What Loucks, who’s now acting U.S. attorney in Boston, didn’t know until years later was that Pfizer managers were breaking that pledge not to practice so-called off-label marketing even before the ink was dry on their plea.

On the morning of Sept. 2, 2009, another Pfizer unit, Pharmacia & Upjohn, agreed to plead guilty to the same crime. This time, Pfizer executives had been instructing more than 100 salespeople to promote Bextra, a drug approved only for the relief of arthritis and menstrual discomfort, for treatment of acute pains of all kinds.

Yeah.  This disgusting practice is spread all over our financial system along with virtually all other areas of “rich and powerful” firms and individuals.

Claims that this is an “isolated incident” are blatant lies; among financial firms alone out of 19 firms you can count 51 offenses:

Source: http://publicintelligence.net/banks-dont-make-promises/

The problem with such “fines” is that the record demonstrates that they provide no deterrent at all.  As I have repeatedly pointed out if the penalty for robbing a bank was that you had to give back 1/3rd of the loot — and that’s all — the bank would be robbed literally every hour on the hour.

The political folks who utterly refuse to address this issue – including the so-called “Tea Party” (Joe Walsh anyone?  Or how about Steve Southerland?) are simply pointing out that you are considered peasants and under the boot of an imperious King who grants those in his favor the right to screw you with impunity.

If you continue to support and vote for these jackals on either side of the aisle — if you continue to provide consent of the governed to the government under those terms — then you’re consenting to being screwed.

It’s that simple folks

You want to know why “OWS” is right?  It’s found right here in this sort of so-called “justice” that the SEC is trying to mete out.  And don’t start this crap about it only being “Democrats” that do this sort of thing: The Republican Party controls The House which means it also controls appropriation of funds and could literally close any department or agency that refused to bring actual prosecutions and demand actual jail sentences.

The so-called “Rule of Law” party likes to run pretty commercials, and in fact Herman Cain’s campaign just called me seeking money a few minutes ago.

I told them that I’d give them a donation when hell freezes over, as not only does Judge Rakoff discern that this sort of “settlement” is a sham but so do I, and I’m not funding any more of that crap. 

The “nice girl” on the other end of the phone hung up on me.  Well f$#c you very little Herman, along with the rest of the Republican field.

The Tea Party had every opportunity to stand on exactly this principle and demand handcuffs and real solutions, and in fact Santelli’s Scream was founded on this very principle, as has been my advocacy since I started this publication.  But that foundation — The Rule of Law and equality under the law — was almost-immediately co-opted by pretty-face Palin and others who immediately turned the focus to things that had nothing to do with how our economy got to be where it is.

If the “Tea Party” wishes to avoid being buried by history then it needs to get in front of this issue now and join with the only group of people who are currently out in the street protesting this exact crime.  They need to refuse to go home until the jackals that caused this economic mess are in the dock for their offenses.  This singular focus and the dismantling of the fraudulent edifices that permeate our financial system can be accomplished; what’s more important is that doing so now is infinitely preferable to continuing the Ponzi and winding up with even more damage to be absorbed.  There’s an opportunity here but the time remaining to take advantage of it is fleeting and soon will be gone if not seized.

That existing group, incidentally, is called Occupy Wall Street.

Last Friday, the Federal Housing Finance Agency filed lawsuits against 17 of the largest banks and financial institutions in the world.  FHFA is seeking a total of $196 billion in restitution from these institutions for not disclosing risky mortgages sold to Fannie Mae and Freddie Mac that went sour. The government news release said, “The complaints filed today reflect FHFA’s conclusion that some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities (PLS) are attributable to misrepresentations and other improper actions by the firms and individuals named in these filings.”  (Click here to read the complete press release naming all banks being sued.)

“Misrepresentations and other improper actions,”—that’s it?  This is all just sloppy work where the banks didn’t pay attention to the facts?  What an outrage!  There are still no criminal prosecutions, let alone any investigations of the major banks that caused a global meltdown.  By the time this is over, millions of homes will be foreclosed upon.  The bankers that caused the mess have been rewarded year after year with huge bonuses since 2008!  The FBI and the SEC can’t find a single criminal act by a single one of these 17 institutions?  The incompetent (and I think criminal) scoundrels responsible are still in charge!

Goldman Sachs was one of the 17 banks sued by the government.  That complaint said, “Goldman Sachs Mortgage Company, GS Mortgage Securities Corp. and Goldman, Sachs & Co.’s misconduct was intentional and wanton. The immediate victims of Goldman Sachs Mortgage Company, GS Mortgage Securities Corp. and Goldman, Sachs & Co.’s fraud was Fannie Mae and Freddie Mac, two Government-sponsored entities whose primary mission is assuring affordable housing to millions of Americans.”

If there are allegations of “fraud,” why have there been no criminal prosecutions of Goldman Sachs or any of the other institutions?  As early as 2004, the FBI was warning of widespread mortgage fraud.  CNN reported, “Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an “epidemic” of financial crimes which, if not curtailed, could become “the next S&L crisis.”  Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions.  ‘It has the potential to be an epidemic,” said Swecker, who heads the Criminal Division at FBI headquarters in Washington. “We think we can prevent a problem that could have as much impact as the S&L crisis,’ he said.”  (Click here for the complete 2004 story from CNN.)  The financial crisis cause by mortgage fraud was not even close to the size of the S&L crisis—it was at least 40 times bigger!!  Why didn’t the FBI stop it, and why are they not prosecuting the crime now?

And what about the “robo signing” stories that came to light in the last few years?  There were countless reports documenting the creation of millions of mortgage documents by foreclosure mills across the country.  They were effectively forging documents, such as Promissory Notes, so banks could illegally foreclose on homes.  The banks reportedly “lost” the proof they owned the property and had the right to take back millions of homes.  If that was the case, how did the banks create mortgage securities without the required paperwork?  Documents such as Promissory Notes are required to be filed with the mortgage-backed securities.  No Promissory Note—no security.  Why is the Securities and Exchange Commission not prosecuting securities fraud?  If there were no documents in a large part of the securities, how did the ratings companies give triple-A grades to what are now called “toxic assets?”  Why aren’t the ratings companies being pursued criminally?

The fact is, not a single high profile New York banker has been prosecuted criminally.  But, hope springs eternal; Goldman CEO Lloyd Blankfein recently hired a high profile defense attorney.  I am not holding my breath on any sort of criminal charges to be filed against Mr. Blankfein.

In closing, I just want to add what I think is one of the most preposterous things about the $196 billion lawsuit.  Bank of America is being sued for $6 billion by the government.  At the first of the year, Treasury Secretary Tim Geithner forgave B of A $127 billion in possible buy backs of sour mortgage debt sold to Freddie Mac.  I wrote about this extensively in a post titled “B of A Settlement, Another Taxpayer Rip-off.”  Just a few weeks ago, Fannie Mae agreed to buy $73 billion in troubled mortgage debt from B of A.  These two deals amount to $200 billion in back door bailouts for just one of the 17 banks being sued.  We gave B of A more than $200 billion from Fannie and Freddie alone, and the government is suing to recover $6 billion?  I have to wonder, is our government stupid, corrupt or both?

The government has not investigated or prosecuted crime that is obvious to anyone with a 10^th grade education.  Federal officials are giving the bankers that caused the entire financial calamity huge bailouts while pretending to punish them with a slap on the wrist.  I think if there were widespread and genuine criminal prosecution, the entire system would collapse.  That is probably why unmistakable crimes are being ignored by most federal and state authorities.  Until fraud is removed from the system and criminal acts are punished, the country will not recover.   Vibrant economies cannot thrive in an environment of lawlessness and mistrust.

By Greg Hunter’s USAWatchdog.com

Gee, why am I not surprised:

Washington, D.C., March 2, 2011 – The Securities and Exchange Commission today charged a former vice president at Colonial Bank who was the head of its mortgage warehouse lending division with conducting a $1.5 billion securities fraud scheme.

The SEC alleges that Catherine L. Kissick enabled the sale of fictitious and impaired mortgage loans and securities from the mortgage warehouse lending division’s largest customer – Taylor, Bean & Whitaker Mortgage Corp. (TBW) – to Colonial Bank, and she caused these securities to be falsely reported to the investing public as high-quality, liquid assets.

Got the essence of this?  The loans were either bad or non-existent but they were booked as good, performing, and real.

That’s nice.

But in an interesting and “oh my gosh, there’s two” sort of change, we have this:

In a related action today, Kissick pleaded guilty to criminal charges filed by the Department of Justice in the Eastern District of Virginia.

That would be the second time some criminal fun comes.  There’s no update yet on the sentence, of course, but at least the plea appears to have happened.  The maximum sentence for the crimes she pled to is reported to be 30 years in the Federal Lesbotell and a $250,000 fine.

Of course the SEC settled for the usual:

The SEC’s complaint charges Kissick with violations of the antifraud, reporting, books and records and internal controls provisions of the federal securities laws. Without admitting or denying the SEC’s allegations, Kissick consented to the entry of a judgment permanently enjoining her from violation of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and from aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. Kissick also consented to an order barring her from acting as an officer or director of any public company that has securities registered with the SEC pursuant to Section 12 of the Exchange Act. Kissick also consented to an order prohibiting her from serving in a senior management or control position at any mortgage-related company or other financial institution or from holding any position involving financial reporting or disclosure at a public company. The proposed preliminary settlement, under which the SEC’s requests for financial penalties against Kissick would remain pending, is subject to court approval.

DON’T DO THAT AGAIN!  I SAY, DON’T DO THAT AGAIN!  I WILL SLAP YOUR HANDS!  YOU DO NOT HAVE TO ADMIT GUILT EVEN IF YOU JUST DID IN CRIMINAL COURT, JUST DON’T DO THAT AGAIN!

Such wonderful enforcement by the SEC – that would be “Suckers Executing Crimes”, right?

After all, we know they use their office computers for porn viewing – so there’s the “Suckers” part.

The Market-Ticker

Just in case there was any confusion that congress (and its Wall Street superiors) almost work for the majority, but not quite, here is some additional evidence: “The U.S. public overwhelmingly opposes raising the country’s debt limit even though failure to do so could hurt America’s international standing and push up borrowing costs, according to a Reuters/Ipsos poll released on Wednesday. Some 71 percent of those surveyed oppose increasing the borrowing authority, the focus of a brewing political battle over federal spending. Only 18 percent support an increase.” Yet somehow the market has already factored in that no matter what happens, Congress has no choice but to continue heaping on the debt, and following this week’s auctions, the total should approach $14.1 trillion in debt, cutting the buffer by another $100 billion. Which is why expect to hear many more threats of untold destruction should Congress actually side with the supermajority for once.

More from Reuters:

The poll underscores the tough task ahead for U.S. lawmakers as the debt nears its current ceiling of $14.3 trillion. Treasury Secretary Timothy Geithner last week warned that a failure to raise the borrowing limit in the coming months could lead to “catastrophic economic consequences”.

Republicans, who won control of the House of Representatives in November on a promise to scale back government, hope to pair any debt-ceiling hike with a commitment from President Barack Obama to reduce long-term spending.

Republicans have vowed to slash $60 billion from the budget as soon as March, but many of those cuts are not likely to be popular with the public.

Just as amusing is the popular response on which programs are “cuttable”:

Only 24 percent say the country can afford to cut back on education spending, a likely Republican target, and 21 percent support cuts to law enforcement.

With the Pentagon fighting wars in Afghanistan and Iraq, 51 percent supported cutbacks to military spending.

Less than half, 45 percent, support an expected Republican effort to pare environmental enforcement.

Some 53 percent support cutting the budgets of financial regulators like the Securities and Exchange Commission, in spite of the widespread consensus that a lax regulatory atmosphere contributed to the devastating financial crisis of 2007-2009.

And 47 percent support cutbacks to national parks, which were shuttered for several weeks during the budget battles of 1995 and 1996.

So there you have it: take money from the SEC’s porn and hush money taxpayer funded sinking fund, and put it back into the Treasury. We are fairly confident that backdoor deals for SEC “enforcers” will provide sufficient loopholes for the grossly incompetent to continue living in abject corruption-funded splendor.

ZeroHedge

Maybe.

The U.S. Securities and Exchange Commission’s internal watchdog is reviewing an allegation that Robert Khuzami, the agency’s top enforcement official, gave preferential treatment to Citigroup Inc. executives in the agency’s $75 million settlement with the firm in July.

Inspector General H. David Kotz opened the probe after a request from U.S. Senator Charles Grassley, an Iowa Republican, who forwarded an unsigned letter making the allegation. Khuzami told his staff to soften claims against two executives after conferring with a lawyer representing the bank, according to the letter. Jon Diat, a Citigroup spokesman, declined to comment.

Oh really? 

After “conferring”?  Is this in the public record somewhere?  What this “conference” was about, perhaps a set of minutes of said meeting?

According to the letter, the SEC’s staff was prepared to file fraud claims against both individuals. Khuzami ordered his staff to drop the claims after holding a “secret conversation, without telling the staff, with a prominent defense lawyer who is a good friend” of his and “who was counsel for the company, not the individuals affected,” according to a copy of the letter reviewed by Bloomberg News.

Oh I see.  That sounds somewhat like the sort of “preference” that the OTS gave IndyMac bank, when they decided to backdate some deposits, and one of the OTS folks working with them actively allowed it.

Why was that so important?  Because the same person had done so during the S&L crisis, and kept his job after that incident!

Oh, and incidentally, Grassley promised an “investigation” of that too. 

What came of it?  Nothing.

Zerohedge has managed to dig up some financial disclosures from this “gentlemen” that make quite a damning case – and implicate possible malfeasance (or worse) in other cases related to banks – especially Deutsche Bank.

Of course given the proclivity of our government and it’s so-called “regulators” to permit theft from the public in plain sight of the police, much like my experience in NY City more than a decade ago when drug peddlers were attempting to sell me narcotics within five feet of a uniformed city police officer, I have absolutely zero confidence that anything approaching an indictment and prosecution will be forthcoming.

The message?

Steal anything that’s not nailed down – the SEC doesn’t give a damn and neither does Congress, despite all the strum and furor they claim when the press – including bloggers like myself and Zerohedge, dig up the facts.