Don't Let the Bad Guys Get Away!

Hollywood loves a good chase. Last night at the Oscars, Tinsel Town sent a strong message to the rest of the country – the bad guys are getting away, and the cops aren’t even on their trail.

For a brief instant the Obama administration’s sorry efforts in holding bankers accountable for the financial collapse took center stage at, of all places, the Academy Awards.

Accepting his Oscar for “Inside Job,” his documentary about the financial collapse, Charles Ferguson used the opportunity to remind the audience of millions that not a single banker had gone to prison for fraud.

Ferguson was saying what the mainstream media has deemed a non-story, following President Obama’s lead in downplaying accountability while highlighting evidence of economic recovery.

But Ferguson joins a handful of prominent critics, including Bill Black, Simon Johnson, former Sen. Ted Kaufman, Dean Baker and Matt Stoller, who have been sending the same message in a variety of less prominent venues.

Meanwhile the president, far from insisting that his prosecutors develop fraud cases against top bankers, appoints them to top positions in his administration.

Typical is this recent column from the New York Times oped columnist Joe Nocera, who pooh-poohs the criminal aspects of the financial meltdown, blaming it on widespread “mania.”

Make no mistake; these are hard cases to make. In the 90s I covered the prosecution of savings and loan magnate Charles Keating, the poster child for bad behavior and political shenanigans for that earlier banking fiasco that also followed a rash of deregulation. Keating was convicted in both state and federal court. Though the convictions were overturned, Keating did serve four and a half years of his five-year state sentence.

Good prosecutors don't mind tough cases. They enjoy the challenge. But their bosses set their priorities and have to give them the support they need.

The Obama administration is barely even trying, afraid of alienating the bankers it’s trying to court. The cases that have been brought are either minor sideshows or they’ve been mishandled.

A local prosecutor told me that federal authorities have shown no interest in the painstaking work of building serious cases against bank executives, which would involve authorities going after minor players such as mortgage brokers, and working their way up the chain of responsibility.

In Inside Job, former New York state attorney general Eliot Spitzer has a suggestion for prosecutors – do unto the bankers what the prosecutors did unto him: go through their credit card receipts looking for evidence of illicit activity, like paying for high-priced hookers. Bust the bankers for their bad personal behavior and then obtain their cooperation in investigating financial abuse.

It may work; it may not. But at least prosecutors wouldn’t be sitting on their hands. They’d be doing their jobs – aggressively going after the bad guys.

 

 

Around the Web / Martin Column / Uncategorized - 02/28/2011

From Memphis to Madison

Last month I wrote about Martin Luther King’s last campaign, joining with Memphis sanitation workers to support their right to organize.

King was brought to Memphis by a local of the same union targeted more than 30 years later by Wisconsin’s governor, the American Federation of State, County and Municipal Employees. That’s where he died, murdered by an assassin’s bullet.

Amy Goodman, writing in Truthdig, suggested King’s spirit hovers over the demonstrations in Madison, which were sparked by the Wisconsin governor’s efforts to take away public workers’ collective bargaining rights.

The parallel is a potent one: both the mayor of Memphis and the governor of Wisconsin gained notoriety taking a tough line, refusing to negotiate.

One of the most striking aspects of the coverage of the demonstrations is the stark contrast between how the mainstream media talk about the showdown in Madison and how the demonstrators in the street talk about it. The media talks about budget deficits, politics and pension costs.

Ask the demonstrators why they’re in the street and they talk about fundamental unfairness – how workers and poor people have to sacrifice to solve the state’s budget crises while bankers who caused the financial crises that led to the state budget crisis continue to thrive without ever being asked to sacrifice.

Jane Hamsher, in Firedoglake, reminds us again how differently contracts that impact bankers are treated from those that impact working people. Remember those outrageous bankers’ bonuses? Those couldn’t be changed, we were told, because we are “a country of laws.”

But pensions for workers? Hey, we have a budget deficit to deal with!

Lots of people don’t have much connection or sympathy for unions, though the battles of union members contributed strongly to the development of the American middle class. Most people no longer have a grasp of that history.

That’s less true in Wisconsin, with its own long history of bitter labor struggles, full of many zigs and zags, ups and downs. The people there have less trouble connecting the struggles of labor unions to the well-being of the middle class.

More than 100 years ago, mill owners in Oshkosh crushed a strike and then had the leaders of the strike charged with conspiracy in an effort to crush the union. The workers brought in the famed firebrand trial lawyer Clarence Darrow to defend them.

In his closing statement, Darrow unleashed his full rhetorical arsenal. But his statement resonates with King’s Memphis campaign as much as it does in Madison, and helps put them in perspective. The case, Darrow insisted, was “but an episode in the great battle for human liberty, a battle which was commenced when the tyranny and oppression of man first caused him to impose upon his fellows and which will not end so long as the children of one father shall be compelled to toil to support the children of another in luxury and ease.”

Financial Crisis / Martin Column - 02/25/2011

Going Without Heat For Goldman-Sachs

With all the trillions tossed around in the government’s efforts to prop up the big banks, a $2.9 billion taxpayer-funded windfall to Goldman-Sachs might not sound like that big a deal.

But imagine if we still had that $2.9 billion, if it was still in the federal coffers and not in the pockets of Goldman bankers.

Maybe President Obama wouldn’t feel the need to cut off aid for poor people to help pay for heating oil through the cold winter – that $2.9 billion would more than pay for the proposed cuts.

Maybe you’re not in favor of helping poor people stay warm in the winter.

How about space travel?

That $2.9 billion could pay for nearly a year’s worth of research on manned space travel, which is also under threat.

But what did we taxpayers get from this generosity to Goldman Sachs?

Absolutely nothing. Worse than that, we rewarded extremely bad behavior.

The $2.9 billion payment was arranged by federal authorities as part of what they have described as their emergency efforts to salvage the financial system in the wake of the financial collapse brought on by the bankers’ greed, recklessness and fraud, enabled by regulators’ laxity.

The Federal Reserve, which was supposed to be overseeing this massive giveaway to the banks, contends it didn’t intend to give the windfall to Goldman-Sachs bankers. It was just $2.9 billion that got away from them in their hurry to fill the bankers’ pockets with our cash- I mean- save the economy. McClatchy News Service, using bland journalism-speak, calls it a “potentially huge regulatory omission.”

Goldman hit the jackpot on our bailout of AIG, in which taxpayers compensated the firm 100 cents on the dollar for bad proprietary trades. That means Goldman gambled with its own money, which it is entirely entitled to do.

But when they lose their money, as the old blues song says, they should “learn to lose.”

Lucky for Goldman, we’re there to pick them up, dust them off and wish them well, no questions asked.

Just how much longer are we going to allow our public officials, Republican and Democrat, to use our money to foot the bill for these deadbeats’ bad gambling debts?

Just how many people are going to have to go cold before we cut Goldman off?

AIG / Around the Web / Federal Reserve / Financial Crisis / Goldman-Sachs / Martin Column / Outrage / President Barack Obama / Too Big To Fail - 02/18/2011

The President's Odd Jobs Choice

About the only the job that Jeffrey Immelt would be less qualified for than jobs czar would be to lead a crackdown on the influence of big money lobbyists.

Oh wait- there is no crackdown on lobbying.

So Immelt, the CEO of General Electric, will have to make do with the job the president has given him as head of the administration’s reconfigured outside economic advisory council, which is supposed to focus on job creation.

I’ve written before about G.E. as a prime example of how major corporations benefited from the bailout without exhibiting any gratitude to taxpayers.

To say that Immelt is a weird choice for a job creation initiative is an understatement.

Under Immelt’s stewardship, G.E. has shredded thousands of jobs in the U.S. while outsourcing many jobs to India and China. In the years before the financial collapse, G.E. focused on building up its enormous credit operation, which melted down under the weight of bad loans along with the rest of the financial sector. If not for the generosity of taxpayers, who gave G.E. more than  $16 billion in low-interest loans to keep it afloat, Immelt himself probably wouldn’t have a job. In 2008, Forbes named Immelt one of the U.S. most overpaid executives.

His company has engaged in economic blackmail, threatening the state of Massachusetts that G.E. would close plants if state officials didn’t cough up tax breaks. It’s true that Immelt’s GE has embraced green technology – but only wherever there is a substantial government subsidy involved.

Meanwhile, GE is spending more than any other firm on lobbying, while it pays little or no taxes.

If Immelt has had any previous innovative ideas about substantially reducing unemployment, he’s kept them to himself. This is the person our president chooses to lead his jobs effort? For Immelt and other corporate and financial titans, the “too big to fail” bubble has never really burst. They’re continuing to rake in profits and shape government policies in their own interests, while the majority who don’t have access to power are shut out from financial security as well as political influence. Rather than challenging this unequal equation, our president has chosen to try to climb into the bubble himself.

Around the Web / Executive Pay / Martin Column / Too Big To Fail - 02/02/2011

Big Bank Launches Attack on Military Families

America’s least-hated banker hasn’t had much to say about how his institution, JPMorgan Chase, wrongfully foreclosed on 14 military families and overcharged thousands of others.

That banker would be Jaime Dimon, the subject of a flattering profile in the New York Times magazine last month, in which he was portrayed as an astute and careful risk manager and staunch defender of the benefits of large banks. Dimon admitted that he wasn’t careful enough before the financial collapse – he missed the problems posed by the securitized pools of investments stocked with bad mortgages that nearly sank the economy.

In the wake of disclosures last year about massive problems in the foreclosure process, Dimon led the charge in dismissing them. He appeared to be less concerned with evidence of bankers’ extreme carelessness than he was that the efforts of 50 states' attorneys general to investigate might slow down the housing recovery.

As Fortune reported, “He (Dimon) strode into the foreclosure fiasco last fall with guns blazing, as usual, claiming Chase wouldn't be tarnished by the banking industry's mortgage misbehavior.”

Dimon has repeatedly insisted his bank hadn’t wrongly foreclosed on anyone.

Whoops.

Over the last several weeks, the news media has reported that JPMorgan Chase had wrongfully foreclosed on 14 active-duty military families and overcharged thousands more on their mortgages.

Bank officials said they discovered mistakes and were in the process of reversing the foreclosures and about $2 million in fees to 4,000 families that the bank overcharged.

The bank may have discovered those ‘mistakes’ in the process of preparing their response to a lawsuit filed by a South Carolina Marine captain whose house they foreclosed on, in violation of the protections provided by the Servicemembers Civil Relief Act.

Under that law, banks aren’t supposed to charge active-duty members of the military more than 6 percent interest on the mortgages.  In addition, members of the military are supposed to be exempt from the delinquency process – including foreclosure.

The Marine captain, Jonathan Rowles, is serving in South Korea. His wife, Julia Rowles, told National Public Radio that she and her husband have been fighting with Chase ever since Rowles was commissioned as an officer five years ago.

They got harassing collection calls, sometimes in the middle of the night, Julia Rowles said. "They would say, 'we will take your house. We will report you to the credit agency. This is a bad situation that you don't want to be getting into. Pay us today.' ”

The bank was charging them 9 to 10 percent interest and nearly $2,000 a month, when they should have been paying $1,400."

JPMorgan’s Dimon has sent his PR spokesmen to deal with the mess. Back in November, Dimon has insisted that his bank is especially friendly toward those who serve their country. On Veterans’ Day, he was touting JPMorgan’s increased efforts to recruit veterans because “it is, quite simply, the right thing to do.”

In the wake of JPMorgan’s disclosures, other big banks, including Citibank, Ally Bank and Goldman Sach’s Litton Loans are reviewing their policies concerning home lending to military families.

Unfortunately, the JPMorgan fiasco is only the latest in a long, tawdry history of financial institutions targeting members of the military for predatory lending. During the recent fight over financial reform, the nation’s military leaders had fought to have the nation’s car dealers covered by the new financial consumer protection agency. But they were no match for the clout of the car dealers, who won the exemption they lobbied for.

According to Army Times, Chase has advertised itself as a military-friendly bank since at least 2005, when it began touting its Home Finance Military Mortgage program, which offers a discount on closing costs in home purchases or refinancing for military members and retirees. Mobilized National Guard and reserve members who had a Chase mortgage in good standing could defer entire mortgage payments for up to 18 months during call-ups. Both those initiatives go beyond the requirements of the SCRA. A bank spokesman couldn’t say if any of the 4,000 service members receiving checks, or Rowles, for that matter, participated in those initiatives.

In November, Dimon celebrated Veterans’ Day by touting his banks’ efforts to recruit those who served their country to work at JPMorgan because “it’s the right thing to do.”

This week Dimon is off to the meeting of the global elite at Davos, Switzerland, where he was complaining about the unjustified hostility toward his profession. “I just think this constant refrain [of] ‘bankers, bankers, bankers,’ - it’s just a really unproductive and unfair way of treating people,” Dimon said. “People should just stop doing that.”

Foreclosures / Martin Column / Outrage - 01/27/2011

Night on Fantasy Island

As a snapshot of the wildly dysfunctional state of our political union, last night’s festivities were a smashing success. All sides were serving up plenty of mom, apple pie and platitudes while ignoring what’s actually left on plates of millions of Americans –nothing.

I did find at least something to agree with in what each of the speakers said. Who can quarrel with President Obama when he calls on us to “win the future?” And I want my government as lean and mean as Paul Ryan and the Republicans do, without any wasteful subsidies that boost corporate tycoons and their overseas expansion rather than creating decent-paying jobs here at home.

It’s true that the tea party’s spokeswoman, Rep. Michele Bachman of Minnesota, looked like aliens had captured her brain and were speaking through her. Maybe we would have been better off if the aliens had captured Obama and Ryan too. At least Bachman briefly took note of the high unemployment rate before she went off to into her own rhetorical fantasyland.

That’s more than you can say for President Obama, who was pitching us his hallucination that his new pals from the Chamber of Commerce are going to beat their corporate profits into ploughshares in partnership with government, in an effort to foster new technologies and growth that we all share. Forgive me if I can’t get too worked up about this. Didn’t we try this government-corporate partnership recently? Wasn’t that what the bailout was?

Back here on Planet Earth, that didn’t work out so well for a lot of us, though it does seem to have worked well for the president’s friends at General Electric and JPMorgan Chase.

Both Ryan and Bachman aren’t interested in any partnerships; they want to dismantle government altogether so that GE, JPMorgan and the rest of the corporatariat can run the show without any interference at all. The only difference is that Bachman would like to do it faster, with less nice talk, than Ryan.

Neither the president, Ryan, or Bachman could focus on reality long enough to mention the long, steep decline of the middle class or the on-going foreclosure crisis, or offer any specific ideas on addressing those very real issues.

Back here on Planet Earth, we’re going to have to harness all of our ingenuity, strength and diversity just to wrestle our political system back from these leaders and their corporate backers before they plunder what’s left of it.

Congress / Financial Crisis / Foreclosures / Martin Column / Outrage / President Barack Obama - 01/26/2011

Stand Up Against Fear, Mr. President

Dear Mr. President:

I'm glad to see reports that you don’t intend to call for cuts to Social Security, as your hand-picked so-called deficit commission recommended.

But turning over the Social Security debate to Congress and standing back to see what they come up with is not good enough, Mr. President.

It’s time for you to take on those who want to undermine Social Security protections under the guise of concern over the deficit, rather than enable them, as you have been doing by stacking your deficit commission with members who had previously supported cuts to Social Security.

Now it’s time for you to fight back against the fear-mongering propaganda campaign that’s been trying to whip up a phony crisis around Social Security, not to stand on the sidelines, Mr. President.

Yes, it will be a tough fight. The pundits, Republicans, many in your own party and a gang of Wall Street tycoons are lined up against you.

But the good news for you politically, Mr. President, is that a majority of the people in the country are lined up with you, should you choose to lead them in this fight.

This is a fight we can win, Mr. President. It’s good politics and it’s good sense.

Yes, it means you’ll have to go up against some of the bankers you’ve been trying to get cozy with. You’ll have to stand up and speak out against the fear that the Social Security cutters are peddling. But if you choose to lead this fight, you may remember that’s why we elected you.

Martin Column / President Barack Obama / Social Security - 01/25/2011

The Road From Memphis

President Obama and his family celebrated Martin Luther King’s birthday by painting fruit characters on a schoolhouse wall as part of anti-obesity campaign.

Evoking King’s legacy, the president didn’t mention Memphis.

That was the slain civil rights leader’s last campaign. He went to support a hotly contested unionization effort on the behalf of the city African-American sanitation workers.

Listening to President Obama’s remarks on King’s birthday, you might think that the slain civil rights leader was mainly about encouraging volunteerism.

No doubt child nutrition is an important issue. But reducing King’s legacy to some bland notion of community service seriously understates what King, and the others who struggled alongside him, were about.

King upset people. He challenged power. He divided the country. During his lifetime, politicians demonized him. Law enforcement wiretapped and harassed him.

King, meanwhile, moved from a struggle for civil rights for minorities to a broader struggle for economic rights.

In Memphis, conflict had been building since February 1968, when two black sanitation workers were crushed to death when the compactor mechanism of their trash truck was accidentally triggered during a heavy rain.

On the same day in a separate incident also related to the bad weather, 22 black sewer workers had been sent home without pay while their white supervisors were retained for the day with pay. A couple of weeks later most of he city’s black sanitation workers began a strike for job safety, better wages and benefits, and union recognition.

The mayor, Heny Loeb, staunchly opposed the workers' demands, especially union recognition, and he resisted all efforts to resolve the strike.

King had led a march in support of the strikers in late March but he was deeply distressed when it turned violent and one man was killed. Nonetheless he returned to the city a week later to participate in another march. Several days before the march was scheduled, as King stepped out of his motel for dinner, he was assassinated.

Only after King’s death did the sanitation workers win their struggle for better working conditions and union recognition.

Is it any wonder that President, who every day binds himself more tightly to the interests of Wall Street and the Chamber of Commerce, wouldn’t want to invoke this more challenging aspect of King’s legacy?

Obama’s election can be seen as the historic culmination as just one of King’s ambitious goals. But on the road that took King to Memphis, we still have a long way to go.

Martin Column / President Barack Obama - 01/18/2011

King's Longest March

Everybody wants to claim a piece of the spirit of Martin Luther King in support of his or her cause. A Pentagon official even had the nerve to say King, who championed nonviolence, would have supported U.S. wars in Afghanistan.

That’s an especially dubious assertion given that the civil rights leader became an increasingly vocal opponent of the Vietnam war, in a move that cost him some support.

What would King make of the U.S. in 2011?

We don’t need to guess. We have the record of his words and deeds, especially in his final year.

As early as 1957, King was highlighting the disparities between rich and poor, In a speech celebrating the 25th anniversary of the Highlander Center, a grass-roots organizing center in Tennessee, he said: “I never intend to adjust myself to the tragic inequalities of an economic system which takes necessities from the masses to give luxuries to the classes.”

By 1963 King was moving his fight for strictly civil rights for minorities, like voting and equal access to public facilities, toward a broader struggle for economic rights for the disadvantaged and least powerful, recognizing that civil rights without economic rights couldn’t guarantee the opportunity and justice for all promised that was key to the great democratic experiment “What good is to it have the right to be able to sit at a lunch counter,” he asked, “if you can’t afford a hamburger.”

He gave the “I have a dream” speech that galvanized a nation at a march on Washington that demanded both jobs and freedom.

But it was in the last year of his life that his focus on economic injustice became most acute and profound.

He put in motion an effort to organize poor people, not just to focus on their plight, but also so they could fight for better jobs and decent housing for themselves.

King certainly would have celebrated the historic election of the nation’s first black president, and Obama began his presidency by evoking King’s spirit.

But the civil rights leader- he would have recognized that that election was not a resting place amid the economic suffering of so many.

He would not have abided the bailouts and tax cuts that allowed bankers and the wealthiest to prosper while those without access to the backrooms of power suffer. He would not have abided the widening gulf between the wealthiest and the poorest Americans, knowing the dire consequences of that division, not just for the poor and the middle class but also for the whole country.

He also would not have been surprised how tough it is to fight the entrenched power of corporations brought back from the dead by compliant politicians.

“It’s much easier to integrate a lunch counter than it is to guarantee a livable income and a good solid job,” King said in April 1967 at Stanford University in a speech entitled `The Other America' that rings as sadly true today as it did more than 40 years ago, with its reference to "work-starved men searching for jobs that don't exist".

“It's much easier to guarantee the right to vote than it is to guarantee the right to live in sanitary, decent housing conditions," King said at Stanford. "It is much easier to integrate a public park than it is to make genuine, quality, integrated education a reality. And so today we are struggling for something which says we demand genuine equality.”

Tomorrow: King in Memphis

Martin Column / President Barack Obama - 01/17/2011

High Court's Low Opinion of Foreclosure Practices

Apparently the Massachusetts Supreme Court neglected to read the bipartisan memo reminding politicians and judges to refrain from doing anything that might upset the banks.

Most judges have shown extraordinary deference to bankers, even amid growing evidence that those bankers haven’t been following the law in pursuing foreclosures.

That may be beginning to change, in the wake of a Massachusetts ruling against banks in a closely watched foreclosure case.

Right now the decision only has force in Massachusetts. But as other cases challenging foreclosures make their way through the courts across the country, other judges are likely to be guided by it. In addition, the ruling will also provide guidance for lawyers posing legal challenges to other mortgages scrambled in the securitization process.

The Obama administration has consistently downplayed evidence of rampant fraud and sloppiness in the way banks split up, packaged and sold off mortgages to investors in the heat of the housing bubble.

Almost all subprime mortgages as well as millions of conventional mortgages originated before the meltdown were securitized and sold to investors. Securitized mortgages account for more than half of the $14.2 trillion in the total outstanding U.S. mortgage debt.

Bankers have tried to dismiss these problems with what’s known as the securitization process as a matter of mixed-up paperwork that can be straightened out.

But the highest level court to examine the issue thus far took the issue much more seriously. Last week the Massachusetts Supreme Court invalidated what had become a common practice – banks seeking to foreclose on properties without properly holding ownership of the promissory note and mortgage as part of the securitization. The court  focused heavily on the use of the power of sale contained in mortgages; the same power exists in the vast majority of California deeds of trust.

Ruling in a closely watched case, the high court rejected arguments by U.S. Bancorp and Wells Fargo & Co. that they didn’t have to prove their authority to foreclose. The banks had argued that evidence that they intended to transfer ownership was enough to establish their standing to foreclose.

The ruling makes dense but fascinating reading, with some passages coming through loud and clear even if you’re not steeped in real estate law.

The justices stressed they weren’t creating any new interpretation of law. “The legal principles and requirements we set forth are well established in our case law and our statutes,” wrote Justice Ralph D. Gants. “All that has changed is the (banks) apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities.”

Banks have argued that their “pooling and servicing agreements” allowed them to transfer mortgages to securitized trusts “in blank” without specifying whom the new owner would be.

But the justices ruled in U.S. Bank v. Ibanez that the “foreclosing party must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder and in order to have the authority to foreclose under the power of sale...”

In a concurring opinion, Justice Robert Cordy wrote: “There is no dispute that the mortgagors (borrowers) had defaulted on their obligations.”

But that’s not the legal standard. “Before commencing such an action...the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order,” Cordy stated.

The ruling could lead to an increase in complicated and expensive litigation, if those whose homes have already been foreclosed on sue to challenge the financial institutions’ authority to conduct the foreclosures. Investors may also sue, contending that the banks didn’t properly document the ownership trail on the mortgages contained in a particular investment pool.

Can banks go back in and straighten out their securitization mess? So far the banks are downplaying the significance of the ruling. But untangling the paperwork may not be so easy. Many of the entities that created the securitized pools have gone bankrupt or dissolved into other businesses. At the very least, it could pose a costly and complicated process for the bankers, one that would entail taking a hard look at the details of the deals that led to the country’s financial collapse.

Foreclosures / Martin Column - 01/11/2011