Written by Biloxi
On Wednesday, The Office of Comptroller of Currency (OCC) and the Federal Reserve had sanctioned mortgage servicers for their misconduct and abuse in the foreclosure debacle was uncovered last year. The two federal regulators found through their investigation that employees at the largest mortgage servicers mishandled the entire loss mitigation process from modification to foreclosure. Wells Fargo, JP Morgan Chase, Bank of America, Citigroup, Ally Financial, HSBC Financial, Metlife, PNC Financial, Suntrust Bank, and US Bank signed consent orders to establish new foreclosure processes and to submit a written plan within 60 days to the federal regulators that strengthen the communication between borrowers and to provide a single-point of contact with the borrowers. Oh, yes, the banks have to compensate those homeowners that were wrongfully foreclosed on. In addition, Lender Processing Services and Mortgage Electronic Registration Systems (MERS) signed consent orders with OCC along with Office of Thrift of Supervision,Federal Housing Finance Agency, and Federal Deposit Insurance Corp. The federal regulators said that they will impose fines and other corrective actions at a later date.
Much of the public and critics called the federal regulators' actions "a slap on the wrist to the bankers." OCC acting head John Walsh defends his actions. Can we really believe that the federal regulators' actions will correct the banks' abuses once and for all? And will those homeowners who were wrongfully foreclosed on will be satisfied with the banks' compensation. The real question is what compensation will the banks give the wrongfully foreclosed homeowners? We have to wait and see. Rest assured that the public has a totally distrust in the banks. The banks' reputation is ruined. And they will be paying the price financially especially in improving their mortgage servicing process. In fact, improvement of the mortgage servicing process of Bank of America and JP Morgan Chase will cost them over $1 billion dollars.
We are learning more and more each day of recklessness lending, excessive risk taking, and illegal practices and abuses by the financial institutions, but there is still not a single bank executive involved in the housing crisis have been charged by the government. NY Times presented a timeline of enforcements and investigations into the financial crisis. In fact, according to the NY Times, federal regulators started to get laxed in their investigations into bank fraud and forgotten to learn from the past lessons of other past high profiled bank officials' fraud cases:
But several years after the financial crisis, which was caused in large part by reckless lending and excessive risk taking by major financial institutions, no senior executives have been charged or imprisoned, and a collective government effort has not emerged. This stands in stark contrast to the failure of many savings and loan institutions in the late 1980s. In the wake of that debacle, special government task forces referred 1,100 cases to prosecutors, resulting in more than 800 bank officials going to jail. Among the best-known: Charles H. Keating Jr., of Lincoln Savings and Loan in Arizona, and David Paul, of Centrust Bank in Florida.
In those past bank fraud cases in the '90's, there were government task forces to crack down on bank fraud. However, in the earlier stages of the financial crisis, there was no policing by the government. NY Times wrote:
As the crisis was starting to deepen in the spring of 2008, the Federal Bureau of Investigation scaled back a plan to assign more field agents to investigate mortgage fraud.
That summer, the Justice Department also rejected calls to create a task force devoted to mortgage-related investigations, leaving these complex cases understaffed and poorly funded, and only much later established a more general financial crimes task force.
Then Michael Mukasey was the Attorney General at the time. Mukasey called the mortgage fraud crisis in the U.S. "white-collar street crimes":
Mr. Mukasey made clear that he saw the mortgage fraud problem at the root of the nation’s housing crisis as a serious one. But he said he was confident that the Justice Department’s current approach — using local prosecutors’ offices around the country to oversee separate F.B.I. investigations — was adequate.
Since he took over as attorney general last November, Mr. Mukasey has grappled with how best to deal with the law enforcement side of the growing housing crisis. He said in March, for instance, that the Justice Department was still struggling to determine whether there was a “larger criminal story” behind the housing crisis.
According to the Financial Crisis Inquiry Commission report, Mukasey's justice department focused more of their resources on terrorism, gang violence and border issues than in mortgage fraud. On page 83:
Michael B. Mukasey, who served as U.S. attorney general from November 2007
to the end of 2008, told the Commission that he recalled “receiving reports of mortgage
failures and of there being fraudulent activity in connection with flipping
houses, overvaluation, and the like. . . . I have a dim recollection of outside people
commenting that additional resources should be devoted, and there being speculation
about whether resources that were being diverted to national security investigations,
and in particular the terrorism investigations were somehow impeding fraud
investigations, which I thought was a bogus issue.” He said that the department had
other pressing priorities, such as terrorism, gang violence, and southwestern border
issues.
And Mukasey's predecessor, Alberto Gonzales, put terrorism first before mortgage fraud according to the FCIC report:
Alberto Gonzales, the nation’s attorney general from February 2005 to September
2007, told the Commission that while he might have done more on mortgage
fraud, in hindsight he believed that other issues were more pressing: “I don’t think
anyone can credibly argue that [mortgage fraud] is more important than the war on
terror. Mortgage fraud doesn’t involve taking loss of life so it doesn’t rank above the
priority of protecting neighborhoods from dangerous gangs or predators attacking
our children.”
All eyes with be on the government and their ability to send a clear message that no one including the banks are above the law. We now see that we have a dysfunctional and separation of justice system: One for Main Street and the other for Wall Street. It is my hope that the government adhere to Thomas Jefferson's words about the banks. Thomas Jefferson said, "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
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