Why Obama gave departing Gibbs a framed tie
Saturday, February 12, 2011
Biloxi Buzz for Saturday
Egypt Erupts in Jubilation as Mubarak Steps Down — CAIRO — Egypt erupted in a joyous celebration of the power of a long repressed people on Friday as President Hosni Mubarak resigned his post and ceded control to the military, ending his nearly 30 years of autocratic rule
Palin's Reality Show May Be Subsidized By Taxpayers
Google Manager & Egyptian Protest Leader Wael Ghonim Thanks Facebook
SEC Charges Former IndyMac CEO and CFO With Securities Fraud
including the former CEO and two former CFOs of the company.
The SEC complaint alleges that the former IndyMac executives made false and misleading claims in the company's 2007 annual report—as well as in offering materials for a $100 million stock offering.
The SEC press release summarizes:
"In early February 2008, IndyMac projected that it would return to profitability and continue to pay preferred dividends in 2008 without having to raise new capital. In late February 2008, Perry and Keys knew that contrary to the rosy projections released just two weeks earlier, IndyMac had begun raising new capital to protect IndyMac's capital and liquidity positions. Specifically, Perry and Keys regularly received information that IndyMac's financial condition was rapidly deteriorating and authorized new stock sales as a result. Yet they fraudulently failed to fully disclose IndyMac's precarious financial condition in the 2007 annual report and the offering documents for the new stock sales."
According to a second complaint, when Abernathy replaced Keys as CFO, Abernathy made similar false and misleading statements in official documents—despite reports of deteriorating capital positions.
In addition, the complaint alleges that Abernathy made false and misleading statements about the quality of IndyMac loans, which were then sold in residential mortgage backed securities (RMBS).
The SEC is now seeking disgorgement of ill-gotten gains, with prejudgment interest, as well as financial penalties.
The SEC complaint alleges that the former IndyMac executives made false and misleading claims in the company's 2007 annual report—as well as in offering materials for a $100 million stock offering.
The SEC press release summarizes:
"In early February 2008, IndyMac projected that it would return to profitability and continue to pay preferred dividends in 2008 without having to raise new capital. In late February 2008, Perry and Keys knew that contrary to the rosy projections released just two weeks earlier, IndyMac had begun raising new capital to protect IndyMac's capital and liquidity positions. Specifically, Perry and Keys regularly received information that IndyMac's financial condition was rapidly deteriorating and authorized new stock sales as a result. Yet they fraudulently failed to fully disclose IndyMac's precarious financial condition in the 2007 annual report and the offering documents for the new stock sales."
According to a second complaint, when Abernathy replaced Keys as CFO, Abernathy made similar false and misleading statements in official documents—despite reports of deteriorating capital positions.
In addition, the complaint alleges that Abernathy made false and misleading statements about the quality of IndyMac loans, which were then sold in residential mortgage backed securities (RMBS).
The SEC is now seeking disgorgement of ill-gotten gains, with prejudgment interest, as well as financial penalties.
JPMorgan Taps Bisignano to Oversee Home Lending
JPMorgan Chase & Co., the second- largest U.S. bank by assets, named Chief Administrative Officer Frank Bisignano to oversee mortgage lending as home-loan losses erode the company’s earnings.
Chief Executive Officer Jamie Dimon and Charlie Scharf, the CEO of Retail Financial Services, told employees in an e-mail today that David Lowman, the unit’s CEO who joined JPMorgan from Citigroup Inc. in 2006, will report to Bisignano, effective immediately.
“As you know, our home lending business has gone through a period of enormous challenge and change,” the e-mail said.
Bisignano takes over the unit as it struggles with the worst housing decline since the Great Depression and soured mortgage investments inherited from the 2008 acquisitions of Washington Mutual Inc. and Bear Stearns Cos. Bank of America Corp., the biggest U.S. lender, split its mortgage unit this month and put Terry Laughlin in charge of cleaning up bad loans.
Bisignano, 51, retains most of his administrative responsibilities, including overseeing technology, real estate, procurement and security. He joined JPMorgan in 2005 from Citigroup where he headed its global transactions services business and was a member of Citigroup’s management committee. The Brooklyn native serves on the boards or is a trustee of New York-based nonprofit groups including The National September 11 Memorial & Museum and St. Patrick’s Cathedral.
Click here for full
Chief Executive Officer Jamie Dimon and Charlie Scharf, the CEO of Retail Financial Services, told employees in an e-mail today that David Lowman, the unit’s CEO who joined JPMorgan from Citigroup Inc. in 2006, will report to Bisignano, effective immediately.
“As you know, our home lending business has gone through a period of enormous challenge and change,” the e-mail said.
Bisignano takes over the unit as it struggles with the worst housing decline since the Great Depression and soured mortgage investments inherited from the 2008 acquisitions of Washington Mutual Inc. and Bear Stearns Cos. Bank of America Corp., the biggest U.S. lender, split its mortgage unit this month and put Terry Laughlin in charge of cleaning up bad loans.
Bisignano, 51, retains most of his administrative responsibilities, including overseeing technology, real estate, procurement and security. He joined JPMorgan in 2005 from Citigroup where he headed its global transactions services business and was a member of Citigroup’s management committee. The Brooklyn native serves on the boards or is a trustee of New York-based nonprofit groups including The National September 11 Memorial & Museum and St. Patrick’s Cathedral.
Click here for full
Friday, February 11, 2011
New Program to Help Military Homeowners, Bank of America Announces
Bank of America announced this morning on “GMA” that it will help members of the military who have trouble meeting their mortgage payments by creating a new program to assist those active duty soldiers.
“What we’re going to do is set up a program of our own that allows us to reduce their principal if they get in trouble, extend their payments, bring their rates down,” Larry DiRita, a spokesman for Bank of America, said.
“Our goal is, look, if you are a military person, you are deployed, you don’t need to be worrying about your house. If you do find yourself in a distressed situation let us know and we will start working with you right away,” he told me.
I received an email last month from Sgt. Keith Oliver – a soldier currently deployed in Iraq. He told me that after Bank of America had reduced his payments for two years the bank suddenly came back and said he owed about $19,000 or else he would face foreclosure.
He kept calling the bank to explain he was deployed but Oliver said he bounced from one department to another until finally he contacted us at “GMA” to ask for help.
When we called Bank of America it quickly realized the error and fixed the situation with Oliver.
“I guess when ABC News called them they said, ‘Okay, well this person is pretty serious,” Oliver told me.
Read on.
“What we’re going to do is set up a program of our own that allows us to reduce their principal if they get in trouble, extend their payments, bring their rates down,” Larry DiRita, a spokesman for Bank of America, said.
“Our goal is, look, if you are a military person, you are deployed, you don’t need to be worrying about your house. If you do find yourself in a distressed situation let us know and we will start working with you right away,” he told me.
I received an email last month from Sgt. Keith Oliver – a soldier currently deployed in Iraq. He told me that after Bank of America had reduced his payments for two years the bank suddenly came back and said he owed about $19,000 or else he would face foreclosure.
He kept calling the bank to explain he was deployed but Oliver said he bounced from one department to another until finally he contacted us at “GMA” to ask for help.
When we called Bank of America it quickly realized the error and fixed the situation with Oliver.
“I guess when ABC News called them they said, ‘Okay, well this person is pretty serious,” Oliver told me.
Read on.
Biloxi Buzz for Friday
Big banks are considering filing lawsuits against the new deposit insurance fund requirements from the Federal Deposit Insurance Corp. Under the new rule, larger financial institutions are required to pay more into the fund, which is used to insure all...
Mubarak Refuses to Step Down, Stoking Revolt's Fury and Resolve — CAIRO — President Hosni Mubarak told the Egyptian people on Thursday that he would delegate authority to Vice President Omar Suleiman but that he would not resign, enraging hundreds of thousands gathered to hail his departure …
Whitman Lost, But Payday Was Sweet
Ethics Watchdog Targets Congressional Sleepovers
Private Contractors Plan To Protect Bank Of America From WikiLeaks
Ruth Madoff Turned Away From Son's Funeral
Madoff 'Surrogate Father' Moved Billions in Account, SIPC Says
Banks Could Face $60 Billion Tab on Bad Mortgage Loans
The banking industry may have to spend more than $60 billion to buy back troubled mortgages, according to a report released on Tuesday by Standard & Poor’s.
The exposure stems from risky loans that the banks packaged and sold as securities at the height of the mortgage bubble. The terms of the mortgage security deals often required lenders to repurchase loans that failed to meet certain underwriting criteria.
S.&.P., the credit rating agency, said the nation’s six largest banks face the brunt of the liability. Bank of America and JPMorgan Chase “have the highest exposure,” the report said.
Read on.
The exposure stems from risky loans that the banks packaged and sold as securities at the height of the mortgage bubble. The terms of the mortgage security deals often required lenders to repurchase loans that failed to meet certain underwriting criteria.
S.&.P., the credit rating agency, said the nation’s six largest banks face the brunt of the liability. Bank of America and JPMorgan Chase “have the highest exposure,” the report said.
Read on.
Thursday, February 10, 2011
Congressman resigns amid Craigslist scandal; Open thread
Rep. Christopher Lee is a married Republican congressman serving the 26th District of New York. But when he trolls Craigslist's "Women Seeking Men" forum, he's Christopher Lee, "divorced" "lobbyist" and "fit fun classy guy." One object of his flirtation told us her story.
On the morning of Friday, January 14, a single 34-year-old woman put an ad in the "Women for Men" section of Craigslist personals. "Will someone prove to me not all CL men look like toads?" she asked, inviting "financially & emotionally secure" men to reply.
Read on.
On the morning of Friday, January 14, a single 34-year-old woman put an ad in the "Women for Men" section of Craigslist personals. "Will someone prove to me not all CL men look like toads?" she asked, inviting "financially & emotionally secure" men to reply.
Read on.
JPMorgan to Madoff trustee: Back off!
NEW YORK (CNNMoney) -- JPMorgan Chase accused the court-appointed trustee in the Bernard Madoff Ponzi case of overstepping his bounds with his $6 billion lawsuit against the financial services company.
"JPMorgan believes that the Trustee is entirely wrong in asserting that JPMorgan violated any federal statutes or regulations," said the bank's lawyer John Savarese, in a document filed in U.S. Bankruptcy Court in New York.
"JPMorgan, moreover, has the right to demand a jury trial with respect to most of the trustee's claims, which could not be conducted in the bankruptcy court," the lawyer said.
Read on.
"JPMorgan believes that the Trustee is entirely wrong in asserting that JPMorgan violated any federal statutes or regulations," said the bank's lawyer John Savarese, in a document filed in U.S. Bankruptcy Court in New York.
"JPMorgan, moreover, has the right to demand a jury trial with respect to most of the trustee's claims, which could not be conducted in the bankruptcy court," the lawyer said.
Read on.
JPMorgan Chase apologizes for overcharging and foreclosing on military families
Written by Biloxi
JPMorgan Chase was sitting in the hot seat at the House Committee on Veterans' Affairs hearing on Wednesday. Stephanie Mudick, executive vice president of J.P. Morgan Chase's office of consumer practices, told the House Committee that the company is embarrassed over the matter, and apologized for the bank's errors. Ms. Mudick said in her prepared testimony:
"We deeply regret that service members have been overcharged and in some cases faced foreclosure because of these errors. We are acting to make these customers whole as soon as possible and enhancing our safeguards to prevent such mistakes going forward. Chase is determined to get this right."
In addition, Ms. Murick said that bank has so far sent the 4,500 overcharged service members $2.4 million including interest. The median payment has been $70 plus interest. She blamed human error and problems with its coding of not identifying military homeowners correctly and said that the bank has implemented new procedures.
Unfortunately, the numbers in overcharging and foreclosing on the troops have increased since the banks' statement last month. Last month, Chase stated tht it overcharged over 4,000 troops and foreclosed on 14 homes. Now, 18 homes were found to have been improperly foreclosed on. Two other homeowners got unspecified settlements, and six cases remain unsettled.
Ms. Mudick's testimony didn't go too well to satisfy the committee. In a heated exchange with Ms. Mudick, California Rep. Bob Filner, the top Democrat on the committee, made it clear he didn't think an apology is enough and told her that she broke the law.
Before Ms. Mudick's testimony, Marine Capt. Jonathan Rowles and wife and their attorney testified first. Mr. Rowles and wife and other military families have class action lawsuit against Chase. Mr. Rowles was denied a 6% interest rate which is under the Servicemembers Civil Relief Act on his 2004 mortgage with Chase while on active duty in 2006. Mr. Rowles and his wife eventually faced threats and harrassment of foreclosure while he was with Training Squadron 86 in Pensacola in 2008. The Rowles lawyer testified that other service members that became a victim of Chase's illegal practices:
Army Reserve Lt. Col. Sarah Letts-Smith’s California home was foreclosed on while she served in Iraq. JPMorgan Chase, which bought the family’s mortgage company, sold the home in 2009.
Marine Lance Cpl. Martin Hupfl’s 2007 loan from Chase Auto Finance Corp. on a Dodge Ram truck was terminated and placed with a debt collector while he was in basic training at Jacksonville Naval Air Station. The 12 percent interest rate was never reduced to 6 percent.
JP Morgan Chase is in serious hot water. The company violated the federal law. The bank has forgotten to read the penalities under Servicemembers Civil Relief Act. In December 2003, President Bush signed into law H.R. 100, the Servicemembers Civil Relief Act which rewritten the Soldiers and Sailors Civil Relief Act of 1940.
Here are the penalties of a foreclose or sale of a service member's home:
(c) SALE OR FORECLOSURE- A sale, foreclosure, or seizure of property for a breach of an obligation described in subsection (a) shall not be valid if made during, or within 90 days after, the period of the servicemember's military service except--
(1) upon a court order granted before such sale, foreclosure, or seizure with a return made and approved by the court; or
(2) if made pursuant to an agreement as provided in section 107.
(d) PENALTIES-
(1) MISDEMEANOR- A person who knowingly makes or causes to be made a sale, foreclosure, or seizure of property that is prohibited by subsection (c), or who knowingly attempts to do so, shall be fined as provided in title 18, United States Code, or imprisoned for not more than one year, or both.
(2) PRESERVATION OF OTHER REMEDIES- The remedies and rights provided under this section are in addition to and do not preclude any remedy for wrongful conversion otherwise available under law to the person claiming relief under this section, including consequential and punitive damages.
Of course, one can argue that banks are not people but a corporation. Unfortunately, the definition of the word "corporation" completed change because the Citizens United v Federal Election Commission lawsuit ruling in the U.S. Supreme Court last year. Citizens United, a conservative non-profit organization won a landmark decision by the Supreme Court ruling that corporate funding of independent political broadcasts in candidate elections can't be limited under the First Amendment. Citizen United has become recognized as an individual not a corporation to be protected under the First Amendment. This landmark ruling will come back to haunt Chase in their case against the service members as a person is held accountable for his or her actions under the Servicemembers Civil Relief Act. Since corporations now have First Amendment rights because of the Supreme Court ruling in favor of Citzens United lawsuit like all Americans, Chase can be held accountable for the federal law. Someone from Chase can go to jail. The question is who from Chase will be left holding the bag and fall on the sword?
JPMorgan Chase was sitting in the hot seat at the House Committee on Veterans' Affairs hearing on Wednesday. Stephanie Mudick, executive vice president of J.P. Morgan Chase's office of consumer practices, told the House Committee that the company is embarrassed over the matter, and apologized for the bank's errors. Ms. Mudick said in her prepared testimony:
"We deeply regret that service members have been overcharged and in some cases faced foreclosure because of these errors. We are acting to make these customers whole as soon as possible and enhancing our safeguards to prevent such mistakes going forward. Chase is determined to get this right."
In addition, Ms. Murick said that bank has so far sent the 4,500 overcharged service members $2.4 million including interest. The median payment has been $70 plus interest. She blamed human error and problems with its coding of not identifying military homeowners correctly and said that the bank has implemented new procedures.
Unfortunately, the numbers in overcharging and foreclosing on the troops have increased since the banks' statement last month. Last month, Chase stated tht it overcharged over 4,000 troops and foreclosed on 14 homes. Now, 18 homes were found to have been improperly foreclosed on. Two other homeowners got unspecified settlements, and six cases remain unsettled.
Ms. Mudick's testimony didn't go too well to satisfy the committee. In a heated exchange with Ms. Mudick, California Rep. Bob Filner, the top Democrat on the committee, made it clear he didn't think an apology is enough and told her that she broke the law.
Before Ms. Mudick's testimony, Marine Capt. Jonathan Rowles and wife and their attorney testified first. Mr. Rowles and wife and other military families have class action lawsuit against Chase. Mr. Rowles was denied a 6% interest rate which is under the Servicemembers Civil Relief Act on his 2004 mortgage with Chase while on active duty in 2006. Mr. Rowles and his wife eventually faced threats and harrassment of foreclosure while he was with Training Squadron 86 in Pensacola in 2008. The Rowles lawyer testified that other service members that became a victim of Chase's illegal practices:
Army Reserve Lt. Col. Sarah Letts-Smith’s California home was foreclosed on while she served in Iraq. JPMorgan Chase, which bought the family’s mortgage company, sold the home in 2009.
Marine Lance Cpl. Martin Hupfl’s 2007 loan from Chase Auto Finance Corp. on a Dodge Ram truck was terminated and placed with a debt collector while he was in basic training at Jacksonville Naval Air Station. The 12 percent interest rate was never reduced to 6 percent.
JP Morgan Chase is in serious hot water. The company violated the federal law. The bank has forgotten to read the penalities under Servicemembers Civil Relief Act. In December 2003, President Bush signed into law H.R. 100, the Servicemembers Civil Relief Act which rewritten the Soldiers and Sailors Civil Relief Act of 1940.
Here are the penalties of a foreclose or sale of a service member's home:
(c) SALE OR FORECLOSURE- A sale, foreclosure, or seizure of property for a breach of an obligation described in subsection (a) shall not be valid if made during, or within 90 days after, the period of the servicemember's military service except--
(1) upon a court order granted before such sale, foreclosure, or seizure with a return made and approved by the court; or
(2) if made pursuant to an agreement as provided in section 107.
(d) PENALTIES-
(1) MISDEMEANOR- A person who knowingly makes or causes to be made a sale, foreclosure, or seizure of property that is prohibited by subsection (c), or who knowingly attempts to do so, shall be fined as provided in title 18, United States Code, or imprisoned for not more than one year, or both.
(2) PRESERVATION OF OTHER REMEDIES- The remedies and rights provided under this section are in addition to and do not preclude any remedy for wrongful conversion otherwise available under law to the person claiming relief under this section, including consequential and punitive damages.
Of course, one can argue that banks are not people but a corporation. Unfortunately, the definition of the word "corporation" completed change because the Citizens United v Federal Election Commission lawsuit ruling in the U.S. Supreme Court last year. Citizens United, a conservative non-profit organization won a landmark decision by the Supreme Court ruling that corporate funding of independent political broadcasts in candidate elections can't be limited under the First Amendment. Citizen United has become recognized as an individual not a corporation to be protected under the First Amendment. This landmark ruling will come back to haunt Chase in their case against the service members as a person is held accountable for his or her actions under the Servicemembers Civil Relief Act. Since corporations now have First Amendment rights because of the Supreme Court ruling in favor of Citzens United lawsuit like all Americans, Chase can be held accountable for the federal law. Someone from Chase can go to jail. The question is who from Chase will be left holding the bag and fall on the sword?
Wednesday, February 09, 2011
Accusations of Fraudulent Mortgage Documents Led Citigroup to Settle With Homeowners
In a handful of cases around the country, Citigroup has reached settlements with homeowners who accused the bank of filing fraudulent mortgage documents [1] to prove its legal standing to collect the debt in bankruptcy proceedings, Bloomberg reported today.
The cases put a twist on recent efforts by banks to patch over problems created because lenders and securitizers were sloppy with documentation during the housing bubble. These homeowners alleged that Citigroup’s mortgage assignments—a key document produced whenever the ownership of a mortgage changed hands—were flawed because they were dated after the bankruptcy was filed.
Mortgage assignments, as we’ve noted [2], are sometimes processed in-house by mortgage servicers, but may also be contracted out to companies, in this case a Texas company called Orion Financial Group. (Orion has not been accused of wrongdoing, but told Bloomberg it does not “create fraudulent documents.”)
In the settlement agreements with homeowners, Citigroup did not admit wrongdoing but agreed to cover their legal costs and slash their interest rates. In a few cases, the bank also reduced the amount outstanding on mortgages. Here’s Bloomberg:
Citigroup paid almost $82,000 in opponents’ legal costs when settling challenges to four bankruptcy claims that used Orion letters in 2010, according to agreements filed with federal bankruptcy courts in New York and Arkansas. The bank reduced interest rates on the remaining debt by an average of 49 percent, while cutting the outstanding mortgage balance in three cases by a combined $55,000, the filings show.
A Citigroup spokesman told Bloomberg that it reaches settlements in cases for “a variety of reasons, usually so both parties can avoid the expense of ongoing litigation.”
Read on.
The cases put a twist on recent efforts by banks to patch over problems created because lenders and securitizers were sloppy with documentation during the housing bubble. These homeowners alleged that Citigroup’s mortgage assignments—a key document produced whenever the ownership of a mortgage changed hands—were flawed because they were dated after the bankruptcy was filed.
Mortgage assignments, as we’ve noted [2], are sometimes processed in-house by mortgage servicers, but may also be contracted out to companies, in this case a Texas company called Orion Financial Group. (Orion has not been accused of wrongdoing, but told Bloomberg it does not “create fraudulent documents.”)
In the settlement agreements with homeowners, Citigroup did not admit wrongdoing but agreed to cover their legal costs and slash their interest rates. In a few cases, the bank also reduced the amount outstanding on mortgages. Here’s Bloomberg:
Citigroup paid almost $82,000 in opponents’ legal costs when settling challenges to four bankruptcy claims that used Orion letters in 2010, according to agreements filed with federal bankruptcy courts in New York and Arkansas. The bank reduced interest rates on the remaining debt by an average of 49 percent, while cutting the outstanding mortgage balance in three cases by a combined $55,000, the filings show.
A Citigroup spokesman told Bloomberg that it reaches settlements in cases for “a variety of reasons, usually so both parties can avoid the expense of ongoing litigation.”
Read on.
Biloxi Buzz for Wednesday
House rejects measure that would extend key Patriot Act provisions through December — A measure to extend key provisions of the Patriot Act counterterrorism surveillance law through December failed the House Tuesday night, with more than two-dozen Republicans bucking their party to oppose the measure.
Mass protests continue in Egypt — Pro-democracy supporters hold fresh rallies in Cairo, just hours after the release of a detained Google executive. — Protesters in the Egyptian capital are holding mass demonstrations, with a new wave of optimism reaching the pro-democracy camp following …
Biden Announces $53 Billion Rail-Funding Plan — WASHINGTON—Vice President Joe Biden unveiled a $53 billion plan Tuesday to upgrade and build intercity passenger-rail networks. — Mr. Biden, along with Transportation Secretary Ray LaHood, announced the plan at Philadelphia's 30th Street Station.
Rich Take From Poor as U.S. Subsidy Law Funds Luxury Hotels
The landmark Blackstone Hotel in downtown Chicago, which has hosted 12 U.S. presidents, opened in 2008 after a two-year, $116 million renovation. Inside the Beaux Arts structure, built in 1910, buffed marble staircases greet guests spending up to $699 a night for rooms with views of Lake Michigan.
What’s surprising isn’t the opulent makeover: It’s how the project was financed. The work was subsidized by a federal development program intended to help poor communities.
The biggest beneficiary of taxpayer help for the Blackstone revamp was Prudential Financial Inc., the second-largest U.S. life insurer. The company got $15.6 million in tax credits from the U.S. Department of the Treasury for helping to fund the project, according to Chicago city records, Bloomberg Markets magazine reports in its March issue.
JPMorgan Chase & Co., the second-largest U.S. bank by assets, also took in money by serving as a lender and the monitor of Blackstone construction financing, city records show.
Since 2003, some of the world’s biggest financial companies, including Goldman Sachs Group Inc., U.S. Bancorp, JPMorgan Chase and Prudential, have taken advantage of a federal subsidy that will cost taxpayers $10.1 billion -- and most of the public has never heard of it.
Investors have used the program, called New Markets Tax Credits, to help build more than 300 upscale projects, including hotels, condominiums, office buildings and a car museum, on streets far from poverty, according to Treasury Department records released through a federal Freedom of Information Act request.
Against Intent
Money spent on high-end development could have been used to build more than 1,000 job-training centers, medical clinics and schools. The program, endorsed by Republican Senator Rick Santorum and House Speaker Dennis Hastert and adopted by Congress, was signed into law by President Bill Clinton in 2000.
Some of the subsidized luxury projects may not have required federal aid at all, the Government Accountability Office found in a 2010 study.
Read on.
What’s surprising isn’t the opulent makeover: It’s how the project was financed. The work was subsidized by a federal development program intended to help poor communities.
The biggest beneficiary of taxpayer help for the Blackstone revamp was Prudential Financial Inc., the second-largest U.S. life insurer. The company got $15.6 million in tax credits from the U.S. Department of the Treasury for helping to fund the project, according to Chicago city records, Bloomberg Markets magazine reports in its March issue.
JPMorgan Chase & Co., the second-largest U.S. bank by assets, also took in money by serving as a lender and the monitor of Blackstone construction financing, city records show.
Since 2003, some of the world’s biggest financial companies, including Goldman Sachs Group Inc., U.S. Bancorp, JPMorgan Chase and Prudential, have taken advantage of a federal subsidy that will cost taxpayers $10.1 billion -- and most of the public has never heard of it.
Investors have used the program, called New Markets Tax Credits, to help build more than 300 upscale projects, including hotels, condominiums, office buildings and a car museum, on streets far from poverty, according to Treasury Department records released through a federal Freedom of Information Act request.
Against Intent
Money spent on high-end development could have been used to build more than 1,000 job-training centers, medical clinics and schools. The program, endorsed by Republican Senator Rick Santorum and House Speaker Dennis Hastert and adopted by Congress, was signed into law by President Bill Clinton in 2000.
Some of the subsidized luxury projects may not have required federal aid at all, the Government Accountability Office found in a 2010 study.
Read on.
SEC is Taking a Hard Look At Bad Mortgage Practices
From the Financial Times:
US securities regulators investigating the role of banks in the mortgage crisis are homing in on the question of whether investors were misled about the home loans used to back securities…
Kenneth Lench, chief of the SEC’s structured products unit, said at a conference in Washington on Friday that issues of interest to the commission include whether investors were properly informed about underwriting and foreclosure practices and the quality of mortgages used to back securities…
Mr Lench highlighted areas that could be of concern: “Were representations relating to the transfer or documentation of mortgages into the loan pools accurate? Did activities such as ‘robo-signing’ contradict those representations? Were disclosures to investors regarding the quality of the loans in the pools accurate?”…
Mr Lench said his unit was working with “legacy” cases from the financial crisis as well as new ones stemming from the “rippling effect of the unfolding crisis”.
US securities regulators investigating the role of banks in the mortgage crisis are homing in on the question of whether investors were misled about the home loans used to back securities…
Kenneth Lench, chief of the SEC’s structured products unit, said at a conference in Washington on Friday that issues of interest to the commission include whether investors were properly informed about underwriting and foreclosure practices and the quality of mortgages used to back securities…
Mr Lench highlighted areas that could be of concern: “Were representations relating to the transfer or documentation of mortgages into the loan pools accurate? Did activities such as ‘robo-signing’ contradict those representations? Were disclosures to investors regarding the quality of the loans in the pools accurate?”…
Mr Lench said his unit was working with “legacy” cases from the financial crisis as well as new ones stemming from the “rippling effect of the unfolding crisis”.
Tuesday, February 08, 2011
Are Foreclosure Attorneys Illegally Outsourcing Legal Work to Non-Lawyers?
An awful lot of attorneys are in deep trouble, two companies will be destroyed, two more will be deeply damaged and a venture capital firm faces big losses, if the allegations in a lawsuit updated Monday are true.
Jonathan and Darlene Thorne accuse the companies, LPS Default Solutions and Prommis Solutions, and their attorneys of having an illegal and fraudulent business model through which non-attorneys secretly practice law and illegally share legal fees. Because many of these fees are for bankruptcy work and are ultimately paid by the debtor, the suit explains, the business model isn't just illegal -- it's also a fraud on the bankruptcy court system in violation of the bankruptcy code, rules and processes.
Although many of the basic allegations have been known since last October, when the original suit was filed, the new complaint contains far more detail about some of the companies involved, particularly Prommis Solutions and its venture capital funder, Great Hill Partners. The suit also adds detail about the time pressure LPS Default Solutions puts on its network attorneys, and how that pressure allegedly feeds document fraud in foreclosure filings, whether in state or bankruptcy court. Given LPS's dominant market position, those pressures have widespread consequences.
See full article from DailyFinance: http://www.dailyfinance.com/story/investing/foreclosure-attorneys-illegally-outsourcing-legal-work-nonlawyers/19830892/?icid=sphere_copyright
Jonathan and Darlene Thorne accuse the companies, LPS Default Solutions and Prommis Solutions, and their attorneys of having an illegal and fraudulent business model through which non-attorneys secretly practice law and illegally share legal fees. Because many of these fees are for bankruptcy work and are ultimately paid by the debtor, the suit explains, the business model isn't just illegal -- it's also a fraud on the bankruptcy court system in violation of the bankruptcy code, rules and processes.
Although many of the basic allegations have been known since last October, when the original suit was filed, the new complaint contains far more detail about some of the companies involved, particularly Prommis Solutions and its venture capital funder, Great Hill Partners. The suit also adds detail about the time pressure LPS Default Solutions puts on its network attorneys, and how that pressure allegedly feeds document fraud in foreclosure filings, whether in state or bankruptcy court. Given LPS's dominant market position, those pressures have widespread consequences.
See full article from DailyFinance: http://www.dailyfinance.com/story/investing/foreclosure-attorneys-illegally-outsourcing-legal-work-nonlawyers/19830892/?icid=sphere_copyright
Bear Stearns Companies, Inc. Securities, Derivative, And Erisa Litigation | Motion to Dismiss Securities Fraud Complaint is Denied
Judge Sweet’s 400 page decision in In re Bear Stearns Companies, Inc. takes us through the collapse of Bear Stearns from three perspectives: a Securities Fraud Complaint against Bear and its accountants, a Derivative Complaint brought by former Bear shareholders who became shareholders of JP Morgan Chase when it acquired Bear in May 30, 2008, and an ERISA complaint by Bear employees for losses in their retirement accounts.
In the fateful Spring of 2008, Bear’s common stock lost in excess of $19.8 billion in market capitalization when the scope of Bear’s investment in subprime and other “toxic” assets was revealed publicly. Bear’s total demise was averted only when it was acquired by JPMorgan at the feeble price of $10 a share. Yet, big losses don’t always add up to successful cases. Judge Sweet allowed the Securities Fraud Complaint to proceed, but he dismissed the Derivative and ERISA Complaints.
One post can’t capture the entire decision, but here’s some flavor:
The Securities Complaint: Judge Sweet rejected Bear’s defense that the complaint was a “classic fraud by hindsight case” which simply alleged “that Bear did not predict the impact of the subprime mortgage crisis.” He identifies misconduct by Bear’s senior officers and directors that was integral to Bear’s decline, and finds that the “competing inference of market implosion has not been demonstrated to overcome the strong inference of scienter developed by Plaintiffs.” That intentional misconduct included the inflation of asset values, the overestimation of Bear’s risk management protocols, the understatement of losses, and the misleading denial of a liquidity crisis. Judge Sweet gave short shrift to Bear’s claim that it disclosed the financial risks it faced in various public filings: “to caution that it is only possible for the unfavorable events to happen when they have already occurred is deceit.”
Judge Sweet also allowed securities fraud claims against Deloitte based on the allegation that Deloitte’s audits of Bear “ were so deficient that the audit[s] amounted to no audit at all …” The opinion includes the Court’s acerbic observation that although Deloitte certified Bear’s financials in 2006 and 2007 without discovering Bear’s true financial condition, “JPMorgan discovered in the course of one weekend the overvaluation of assets and underestimation of risk exposure in Bear Stearns’ financial statements.”
400 page opinion below…
In Re Bear Stearns Companies, Inc. Securities, Derivative, And Erisa Litigation
In the fateful Spring of 2008, Bear’s common stock lost in excess of $19.8 billion in market capitalization when the scope of Bear’s investment in subprime and other “toxic” assets was revealed publicly. Bear’s total demise was averted only when it was acquired by JPMorgan at the feeble price of $10 a share. Yet, big losses don’t always add up to successful cases. Judge Sweet allowed the Securities Fraud Complaint to proceed, but he dismissed the Derivative and ERISA Complaints.
One post can’t capture the entire decision, but here’s some flavor:
The Securities Complaint: Judge Sweet rejected Bear’s defense that the complaint was a “classic fraud by hindsight case” which simply alleged “that Bear did not predict the impact of the subprime mortgage crisis.” He identifies misconduct by Bear’s senior officers and directors that was integral to Bear’s decline, and finds that the “competing inference of market implosion has not been demonstrated to overcome the strong inference of scienter developed by Plaintiffs.” That intentional misconduct included the inflation of asset values, the overestimation of Bear’s risk management protocols, the understatement of losses, and the misleading denial of a liquidity crisis. Judge Sweet gave short shrift to Bear’s claim that it disclosed the financial risks it faced in various public filings: “to caution that it is only possible for the unfavorable events to happen when they have already occurred is deceit.”
Judge Sweet also allowed securities fraud claims against Deloitte based on the allegation that Deloitte’s audits of Bear “ were so deficient that the audit[s] amounted to no audit at all …” The opinion includes the Court’s acerbic observation that although Deloitte certified Bear’s financials in 2006 and 2007 without discovering Bear’s true financial condition, “JPMorgan discovered in the course of one weekend the overvaluation of assets and underestimation of risk exposure in Bear Stearns’ financial statements.”
400 page opinion below…
In Re Bear Stearns Companies, Inc. Securities, Derivative, And Erisa Litigation
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