business - Page 2 - Represent Consumers

Steve Jobs and the Democratization of Technology

I am old enough to remember when a computer was something owned by a corporation or a university and filled a huge, specially constructed room. I did my college thesis using one of those “mainframes” to tabulate punch cards that contained data, which I inputted through a giant typewriter.

Then came the Apple II, a 1 MHz computer that had 4k of RAM, recorded data onto an audiocassette tape – later replaced by a 51/4 inch floppy disk drive. When it went on sale in 1977, it cost $1298. With some trepidation about potentially undermining its mainframe sales to big business, IBM hurried to catch up with Apple, introducing its first personal computer in 1981. The Apple II was followed by the Macintosh in 1984. Quickly the personal computer found its way into the homes and offices of hundreds of millions of Americans, and later, through the iPhone, into their pockets.

Much will be said over the next few days about how Steve Jobs revolutionized the entertainment business. And he did, indeed.

But consider the impact his vision of a personal computer has made in placing the power of technology into the hands of the People. I wrote Proposition 103 on a Mac. I printed out campaign leaflets out an Apple LaserWriter, a $4000 printer that let you change the type style and made what I wrote look like it was printed by a professional press.

Today, as Americans assemble to protest our economic plight and the politicians’ fealty to powerful corporate interests, they access unfiltered information and communicate freely with each other through the internet and social networks that could not exist but for the democratization of computer technology pioneered by Steve Jobs.

Mortgage Frauds, Official Shenanigans

Just how did the biggest bank fraud in the nation’s history go on with the full knowledge of authorities for 7 years?

Apparently, without much trouble.

Earlier this week, a judge sentenced Brian Farkas to 30 years in prison. He was the head of one of the country’s largest non-depository mortgage companies, convicted of a multibillion-dollar fraud that has been labeled the largest in the country’s history. The case was brought to prosecutors by the bailout’s former special inspector general – after a bank associated with the mortgage company tried to rip off the Troubled Asset Relief Program for $550 million.

Prosecutors said they sought the tough sentence as a deterrent, though bankers might not get the message.

Writing in the New York Times, white-collar criminal law expert Peter Henning said more respectable executives at bigger companies “perceive themselves as different from – and often better than – those who have been caught and punished, even if they are not.”

But one of the most outrageous aspects of the case has nothing to do with Farkas’ behavior: It has to do with how a government-sponsored agency, Fannie Mae, found evidence of his wrongdoing in 2000 and didn’t report it. According to court testimony as reported by Bloomberg News and the New York Times, when Fannie Mae found out that the bank was selling loans that had no value, the agency merely cut its ties with the bank.

Another government-sponsored agency picked up the business a week later, Bloomberg reported.

William Black, a former bank regulator who has been a sharp critic of the current administration’s lack of aggressiveness in investigating fraud in the wake of the 2008 financial collapse, told Bloomberg: “If there had been a criminal referral, Farkas would have gone to jail in 2002.”

Farkas’ firm, Taylor Bean remained in business for another 7 years before it collapsed in August 2009.

The confidential agreement to disentangle Freddie Mac from Taylor Bean was overseen by Freddie Mac’s general counsel, Thomas Donilon, who now serves as national security adviser to President Obama.

It’s not the first time Donilon’s actions have been called into question: while he was a lawyer in private practice, he led lobbying efforts to undermine the credibility of an investigation into Fannie Mae’s shaky finances in 2004.

It’s worth cheering that prosecutors finally successfully prosecuted a major case stemming from mortgage crowd. But it’s also worth noting that the perp does not come from the ranks of the nation’s too big to fail banks.

It’s also worth noting that Donilon’s conduct in the financial collapse didn’t get him cast out as a pariah, it won him one of the most important jobs in this administration.

Around the Web / Financial Crisis / Martin Column / President Barack Obama - 07/01/2011

Real Fraud, Faux Enforcement

The number one question people ask me when they find out I write about the financial crisis is: “How come nobody has gone to jail?”

I think I have found an explanation. His name is Robert Khuzami and he works as chief of the Securities and Exchange Commission’s enforcement division.

He is not the literal reason. SEC enforcement is civil, not criminal. So he’s not responsible for putting people in prison.

But focusing on Khuzami puts into sharp focus the conflicts at the heart of the government’s efforts to regulate and hold accountable the big banks.

Khuzami is a former federal prosecutor. But he came to the SEC from a high-profile position he took after his stint as a lawman: he served as general counsel to Deutsch Bank, one of the world’s largest investment banks, which had a massive business in the securitized mortgage loans, and was the recipient of nearly $12 billion in “backdoor bailout” federal funds funneled through AIG.

The Wall Street Journal reported that Khuzami was the first SEC enforcement chief to come directly from a big bank. He is one in a long line of Obama economic appointments with strong ties to the financial industry, who either worked for the banks directly or in their interests by favoring deregulation that was one of the major causes of the economic collapse.

Now Khuzami’s former employer, Deutsch Bank, is in hot water with the feds, who sued the bank earlier this month alleging that the “bank committed fraud and padded its pockets with undeserved income as it repeatedly lied so it could benefit from a government program that insured mortgages,” Business Week reported.

For the SEC, it’s all kosher because its stringent recusal policy assures that Khuzami won’t work on any Deutsche Bank cases.

Remember that Khuzami was not just a guy punching a clock. He was the bank’s general counsel, so he supervised legal issues for the firm.

So here was a former federal prosecutor who, in the midst of the go-go real estate boom, apparently thought it was OK for his bank to commit mortgage fraud. Zero Hedge dug up his financial disclosure statement, which reveals he was compensated nearly $4 million in salary and bonuses between 2006 and 2009, and may lose money if Deutsche Bank suffers as a result of the government’s lawsuit.

The president and the SEC, knowing what kind of mischief the too big to fail banks were engaged in during the boom, and how Khuzami had profited from it, thought it was a terrific idea to appoint somebody like him to go after his former cronies.

Khuzami’s tenure at SEC has been marred by accusations that he gave two Citibank executives preferential treatment in agreeing to drop charges against them after he met secretly with their lawyer. In January, the SEC’s inspector general said it was investigating the matter.

Is there no one but former bankers available to work in the financial sector? The president, with $1 billion to raise to fund his reelection effort, has been unwilling to dig into the fraud at the heart of the financial collapse. Until he does, the economic recovery will be built on quicksand.

AIG / Martin Column / President Barack Obama / Securities and Exchange Commission (SEC) / Too Big To Fail - 05/11/2011

The Never-Ending Bailout

Even though banks' super-charged profits and eye-popping bonuses are back, they want you to keep paying the costs of their foreclosures.

In California, where the foreclosure crisis has hit with brutal force, it will cost communities between $600 billion and $1 trillion in lost property value, almost $4 billion in lost property tax revenue, and over $17 billion in local government costs between 2008 and 2012, according to Ellen Reese, a University of California Riverside sociologist and Jan Breidenbach, who teaches housing policy at USC, writing in the San Bernardino Sun.

That amounts to be about $20,000 per foreclosure that local governments [meaning you] have to pay every time a bank forecloses on a home.

One California legislator has made a modest suggestion: have banks pay those costs at the time of the foreclosure, so taxpayers don’t have to absorb them later.

The way the banks have responded, you would think that the legislators had proposed seizing the banks and distributing the bankers’ money on Main Street.

The mortgage bankers’ association, in best fear-mongering fashion, told its members that making the banks pay the costs of their failed loans would dry up all future home lending in the state.

In her April 6 letter to her membership, the association’s president, Pam Sosa, doesn’t offer any suggestion how the costs banks are currently passing on to you and me could be mitigated.

Meanwhile the California Bankers’ Association says if the bill becomes law, they’ll simply pass the cost on to their customers.

Why should the banks have to pay when they’ve done such a stellar job convincing the politicians that you won’t mind picking up the tab for the bankers’ losses?

If you thought that the financial collapse would curtail the banks sense of entitlement to write their own rules for their business, you would be wrong.

If you thought that the financial collapse would have made the banks think twice before demanding that we pay the costs when their business goes south, their reaction to AB 935, sponsored by San Fernando Valley Democrat Bob Blumenfield, demonstrates that you would be wrong.

Of course, the real purpose behind AB 935 is not to get the banks’ money. It is provide more of a financial incentive to the banks to work out sustainable modifications that would allow homeowners to remain in their homes. The Obama administration’s Home Affordable Mortgage Program has had little success in encouraging banks to modify loans because in part, the incentives it offers to the banks are too small But the banks find it tough to make their case on the merits. They can’t argue they don’t have enough money to pay their own way. Instead they rely on fear tactics and the inside game, which has served them so well in getting legislators and regulators to water down efforts to crack down in the wake of the financial collapse. In the depths of the recession in California, at the same time bankers were collecting billions in bailout, they were spending $70 million in lobbying fees and campaign contributions to thwart or weaken legislation that would have protected homeowners in the foreclosure process.

Testifying earlier this week on behalf of AB 935, economist and blogger Mike Konczal described foreclosures as a “lose-lose situation.” A foreclosure fee that accurately covers the real costs the community will have to pay will encourage more sustainable modifications, he said. He also debunked the mortgage bankers’ argument that it would have an impact on new lending, because it will only be applied to already existing loans. Citing recent Federal Reserve statistics, Konczal said relatively few homeowners are actually walking away from their “under water” homes, “and are willing to pay to do right by their communities and their promises. It would be great to have a financial system that met them halfway."

But the banks disagreed. They fought back hard on AB 935. Late Tuesday, Peggy Mears of Alliance of Californians for Community Protection sent around an email to say that the legislation appeared to be dead for the year, stuck in legislative committee.

Financial Crisis / Foreclosure / Martin Column - 04/26/2011

Happy Talk

Treasury officials and many politicians are busy patting themselves on the back because the Troubled Asset Relief Program will end up costing taxpayers less then expected.

The way these folks describe it the TARP and other aspects of the federal bailout were just supposed to function as a loan program for the banks while they were having some trouble.

TARP is also winning praise for having “restored trust” in our financial system.

Beyond the scary rhetoric that gave birth to the bailout and self-congratulatory sermons it’s being buried with, the bailout consisted of a set of rules and a way of picking winners and losers in the economic crisis that did anything but build trust.

Remember when the Fed chair, Ben Bernanke, insisted that he was a Main Street guy, that he was interested in the financial system only inasmuch as it helped out Main Street?

But the bailout institutionalized a system where the government could only afford to bail out the biggest bankers and corporate officials while abandoning smaller banks and business owners along with millions of troubled homeowners and vulnerable employees.

As Fortune’s Alan Sloane wrote, “the more bailout rocks you turn over, the more well-connected players you find who aren't being forced to pay the full price of their mistakes.”

Oh well, the apologists say, nothing’s perfect. It could have been so much worse.

One official who hasn’t joined in the festivities is Neil Barofsky, the former special inspector for the Troubled Asset Relief Program, who bid the bailout a scathing farewell in the New York Times, which you can read here.

The Obama administration and bailout apologists would like to have us believe that it was just a necessary first stage of the recovery to ensure that the bankers stayed rich and the wealthiest Americans’ increasing share of the nation’s wealth kept on growing.

But in Barofsky’s view, there was nothing inevitable about the no-strings attached bailout that filled the bankers’ pockets while offering little to Main Street. It had nothing to do with the operation of the free market either. It was very carefully crafted by public officials working hand in hand with Wall Street to maintain its power while gnawing away at the increasingly fragile livelihoods of ordinary Americans.

As Barofsky notes, “Treasury officials refuse to address these shortfalls. Instead they continue to  stubbornly maintain that the program is a success and needs no  material change, effectively assuring that Treasury's most specific  Main Street promise will not be honored.”

And while recent employment gains are welcome news, Dean Baker points out the losers – African-Americans among whom unemployment remains distressing high and wage earners in general, whose pay is not keeping up with inflation.

The bailout celebration is just part of the happy talk designed to buoy the notion that the recovery is well underway. But this bailout-fueled recovery continues to pick highly predictable winners – with the powerful, wealthy and politically connected doing swimmingly while everybody else just limps along.

Around the Web / Martin Column / SIGTARP / TARP - 04/04/2011

Obama Visits the Nasty Neighbor

President Obama paid a call on the U.S. Chamber of Commerce a few days ago. No organization has done more to obstruct and derail the president's policy agenda: on behalf of the massive industries that fund its $200 million budget, the Chamber fiercely opposed health care reform, financial reform, the Consumer Financial Protection Bureau, environmental protection, and consumer access to the courts, often at the expense of small businesses. Last year, it killed a bill in the Senate that would have stripped big business of tax breaks when they outsource American jobs to other countries. Its litigation shop, lavishly supported by a who's who of corporate defendants in civil and criminal matters, has been remarkably successful in protecting big business in cases before the U.S. Supreme Court. The U.S. Chamber is a highly partisan operation that will never cede an inch of ground to the President or his party.

Still, it wasn’t so much that Obama went to Chamber, or what he said when he got there, that bothered me. It was that he walked there from the White House.

The Chamber's headquarters is only three tenths of a mile from 1600 Pennsylvania Avenue, a five minute stroll across Lafayette Park. Most Americans would never consider taking the car (except maybe Angelenos).

But when the President rolls, dozens of vehicles, from ambulances and TV trucks to communications and heavily armed Secret Service vans, go with him. It's spectacle, but, as President Reagan understood, the motorcade is a potent symbol of the power and majesty of the presidency.

Going on foot to the headquarters of corporate America, Obama surrendered not merely the trappings of power but, inescapably, a measure of the dignity of his office.

A year ago, Obama hoofed it back to the White House from a speech at the Chamber. That was right after his annual physical, and Obama joked that he needed to walk off some of his cholesterol. More importantly, that was before the mid-term elections, when the President’s party got walloped, thanks in no small part to the $31.7 million the Chamber spent around the nation, 93% of which went to elect Republicans.

His latest visit wasn't exactly "hat in hand," but by the President's own reckoning it was pretty close: “I'm here in the interest of being more neighborly," Obama told his hosts. "Maybe if we had brought over a fruitcake when I first moved in, we would have gotten off to a better start.”

"I'm going to make up for it," the President promised. Some of us think he's already done plenty for big business, and not quite so much for average Americans, most of whom are struggling to survive the aftermath of the debacle on Wall Street.

Mr. Obama was careful not to completely prostrate himself before the Chamber's bigwigs. But every remark that could be considered a point of disagreement was tempered with a nod to the Chamber’s ideology. The President defended health care reform, but instead of discussing the human toll of the private insurance mess, explained that it “made our entire economy less competitive.” He warned that “the perils of too much regulation are matched by the dangers of too little,” referring to the financial crisis, but did not discuss lost jobs or homes. Instead he said, “the absence of sound rules of the road was hardly good for business.” Invoking one of John F. Kennedy’s most memorable speeches, Obama said, “as we work with you to make America a better place to do business, ask yourselves what you can do for America.” But the man who appeared before the Chamber conceived of his job far differently than he did when he asked Americans for it in 2008: “the final responsibility of government,” President Obama told the Chamber audience, is “breaking down barriers that stand in the way of your success.”

This week’s stroll was part of the President’s Chamber charm campaign, which began in earnest with the State of the Union speech in January, when the President seemed to declare the recession over because “the stock market has come roaring back” and “corporate profits are up.”

For one in five Americans still out of work, for the one in four homeowners whose homes are worth less than the amount they owe on their mortgages, that was a painful moment reminiscent of George Bush’s “mission accomplished” speech back in 2003 about the Iraq War. Obama spent the rest of the State of the Union on a combination of platitudes and pandering to his opponents, pledging among other things to get rid of unnecessary government regulations - one of the Chamber's perennial priorities.

There are plenty of other places the president could have gone if he was in the mood for an outing. The national headquarters of the AFL-CIO is only a few steps away from the Chamber, but he has never made that trip, as the California Nurses Association pointed out. Sadly, that would not be as controversial a venue as the President might fear: the AFL issued a joint press release with the Chamber praising the president’s State of the Union speech. Still, a visit from the president would have made a statement to the nation about the role working women and men play in what is known as the "real" economy (as opposed to Wall Street and the Money Industry). A fairly straightforward jog down Pennsylvania Avenue would have taken Mr. Obama to Consumer Watchdog's office on Capitol Hill.

We'll be watching where the President wanders to next. If you know what you are doing, and are clear about where you want to go, navigating the nation's capital isn't hard. But for newcomers who don't, it's very easy to get lost in D.C.

Harvey Column / Outrage / Uncategorized - 02/11/2011

Death by a Thousand "Buts"

After two years in office, President Obama has decided it's time to fix one of the colossal mistakes of his predecessor: too much federal regulation.

I don't remember George W. Bush as a consumer advocate who, in his zeal to regulate corporations, got carried away. But last week President Obama announced a new priority for his administration. Federal regulations “sometimes have gotten out of balance, placing unreasonable burdens on business—burdens that have stifled innovation and have had a chilling effect on growth and jobs,” the President explained, implying that it was in fact the government that crippled our economy, just like pro-corporate conservatives have been saying.

Faced with this threat to our national security, there was only one thing to do, and Obama stepped up. He commanded the entire federal government to review every regulation on the books and get rid of “outdated” rules and “unnecessary paperwork.” In a rousing call to arms, the President concluded: “This is the lesson of our history: Our economy is not a zero-sum game. Regulations do have costs; often, as a country, we have to make tough decisions about whether those costs are necessary.”

Obama didn’t invent the cost/benefit approach to regulation. That was concocted by big business-funded think tanks and adopted by President Ronald Reagan, who issued Executive Order 12291 immediately after taking office in 1981. Its preface is eerily similar to Obama’s, proposing “to reduce the burdens of existing and future regulations, increase accountability for regulatory actions, provide for presidential oversight of the regulatory process, minimize duplication and conflict of regulations…”

Reagan demanded that any regulation that imposed costs on businesses that exceeded its "benefits" be eliminated. The problem is that cost/benefit analysis doesn’t always take into account certain intangible considerations or values that are difficult to quantify in dollars, such as the benefits of unpolluted water or the worth of a human being. In an infamous internal memo (PDF) uncovered in litigation over the now extinct Ford Pinto’s exploding gas tank, company executives compared the cost of fixing the vehicles ($137 million) versus what it would have to pay for expected deaths and injuries ($49.5 million) and decided that the cost of repairing each car - $11 dollars – exceeded the benefits.

Government is supposed to protect us against such reasoning, not use it as a guiding principle.

I was working at Public Citizen Congress Watch in Washington, D.C. at the time, and Reagan’s disdain for government regulation became the centerpiece of his Administration agenda. James Watt, Reagan’s controversial appointee to the Interior Department, sacked the agency, turning it into a mouthpiece for oil, mining and other industries supposedly regulated by the agency. The Reagan Administration’s deregulation of savings banks led to reckless investments, fraud and corruption, necessitating a bailout – sound familiar? – that ultimately cost taxpayers about $124 billion.

Is history repeating itself? In a nod to those who supported him as a candidate because of his forceful speeches against special interests and corporate abuses, President Obama was careful to acknowledge the importance of “child labor laws,” “the Clean Air Act” and federal rules against “hidden fees and penalties by credit card companies.” In a nod to the elephant in a pink dress sitting on the divan in our living rooms, the President noted that “a lack of proper oversight and transparency nearly led to the collapse of the financial markets and a full-scale Depression.” “Where necessary, we won't shy away from addressing obvious gaps” in federal rules, Obama insisted.

It's painfully obvious that the President hoped his foray into Reagan-style anti-regulation rhetoric would curry favor with Wall Street, its wholly-owned subsidiary, the U.S. Chamber of Commerce, and their toadies in Congress. They’ve been very, very mad at the President ever since he had the temerity to sign a toothless financial reform bill that left the financial industry free to revert to its pre-bailout speculative ways, not to mention the hopelessly compromised health care law that requires every American to buy health insurance from private insurance companies starting in 2014, but does not effectively regulate how much we have to pay them.

Obama went so far as to announce his new regulatory policy in a guest column for the Wall Street Journal's editorial page, where at least one attack on Obama is on the menu every day.

This latest gesture of appeasement didn’t work out as the President hoped, though. "Yes, but" was the nearly universal response from the intended recipients of the President’s largesse, as Associated Press reporter Tom Raum reported. For your convenience, I’ve highlighted the “but factor”:

“Obama’s action is ‘a positive first step,’ said Thomas J. Donohue, president of the U.S. Chamber of Commerce, the nation’s biggest business organization. But, Donohue added, ‘a robust and globally competitive economy requires fundamental reform of our broken regulatory system.’ He called on Congress to 'reclaim some of the authority it has delegated to agencies.’"

“The National Association of Manufacturers said it ‘appreciated’ Obama’s call for a regulatory review, but called for Obama to demonstrate results by ‘delaying poorly thought-out proposals that are costing jobs,’ listing the EPA’s proposals to regulate greenhouse gases as a prime example."

A “spokesman for House Speaker John Boehner, called Obama’s review a welcome acknowledgment that government regulations have economic consequences. But he said the president should take bolder steps immediately.”

"David Walker, former U.S. comptroller general, said in an interview that it was ‘fully appropriate to engage in a baseline review of existing federal regulations.’ But Walker, head of a balanced-budget advocacy group called Comeback America Initiative, questioned having the agencies themselves hunt for harmful regulations. ‘We need to have an independent review process that has transparency,” he said. Walker said many of today’s regulations date back to the 1950s and need to be revamped.”

For a little conjunctional variety, here's the response of House Majority Leader Eric Cantor:

“Obama’s executive order ‘shows that he heard the same message I did in the last election - that Americans are sick and tired of Washington’s excessive overreach and overspending.’ ‘While I applaud his efforts, we must go further,’ Kantor added. He proposed more aggressive steps to strike down ‘needless and burdensome’ regulations that plague businesses and stifle job growth.”

President Obama still doesn’t understand that his political opponents will never voluntarily support anything he does, short of a complete capitulation (and perhaps not even then). This is not just a matter of interest to the political class. If the White House spends the next two years trying to placate the implacable, the rules, regulations and legislation needed to restore the economy and protect the public health and safety are never going to see daylight.

A NOTE TO READERS: If you like what you read here, please share it with your friends on Facebook, Twitter etc. - click on the icons at the top of this column.

Congress / Financial Crisis / Financial Reform Legislation / Harvey Column / President Barack Obama - 01/24/2011

Don't Foreclose on the Rule of Law

As the foreclosure process implodes in the U.S., the big banks and their defenders are scrambling to defend the mess they’ve created, dismissing serious legal issues as mere technicalities.

I covered courts as a reporter for years and I learned something about legal technicalities.

What I learned was that whenever some lawyer started dismissing some legal rule as a technicality, they were about to try to heave some of their adversary’s fundamental rights out the window.

In the foreclosure mess, those adversaries would be the banks’ former business partners, their borrowers, the people they loaned money to.

Now the big banks are trying to dismiss the rules that govern the foreclosure process as legal technicalities.

Take for example the Florida case in which a judge ruled earlier this year that a document that was supposed to show that U.S. Bank owned the mortgage in December 2007 wasn’t created until the following year. The document filed by the bank, the judge wrote in March, “did not exist at the time of the filing of this action…was subsequently created and…fraudulently backdated, in a purposeful, intentional effort to mislead.” She dismissed the bank’s case.

The bank’s lawyer blamed carelessness. He explained: “Judges get in a whirl about technicalities because the courts are overwhelmed....The merits of the cases are the same: people aren't paying their mortgages.”

One of the other things I learned was that judges tended to use very precise wording in their rulings. If the judge in the Florida case was feeling overwhelmed, she didn’t mention it. What she did say what that somebody had fraudulently created a document.

That’s not a technicality. And it doesn’t matter if you’ve been making your mortgage payment or not. Banks are not allowed to foreclose on a home using fraudulent documents. Period.

One of the aspects of the rule of law is that it applies the same to everybody: a bank isn’t allowed to submit fraudulent documents to a court any more than a pauper is. That’s not a technicality. That’s the rule of law.

In the most recent brouhaha, a number of big banks, Ally, PNC Financial, J.P. Morgan Chase and Co and Bank of America, have acknowledged that their officials didn’t actually read key foreclosure documents before submitting them in court. Some documents appeared to have been forged; others appeared to contain false information.

A number of state attorney generals across the country have threatened legal action against the banks. Faced with a firestorm, some banks have voluntarily halted foreclosures in 23 states: the ones where judges oversee foreclosures. Only Bank of America has halted foreclosures in all 50 states.

One of the first banks to acknowledge that its own paperwork hadn’t been properly reviewed was Ally Bank, formerly known as GMAC. The latest controversy wasn’t the first time GMAC’s legal work on foreclosures came under scrutiny.

In 2006, Bloomberg News reported, another Florida judge sanctioned the company, finding that it submitted false affidavits to the court in a foreclosure case. The judge ordered GMAC to submit an explanation, certify that its policies had changed and pay the opposing party’s legal costs of more than $8,000.

As a result, GMAC’s legal department issued a statement that told employees “not to sign verifications on court pleading documents unless you have independently reviewed and checked the facts.”

The new policy, the Journal reported, was distributed in June 2006; it also stated in italics and boldface that GMAC employees should sign documents only in the presence of a notary. GMAC told the court that the policies were “being corrected.”

Three and a half years later, a GMAC employee said in a deposition that his team of 13 people signed about 10,000 documents a month without reading them.

Deborah Rhode, a Stanford Law professor, told Bloomberg, “It’s not ‘technical’ when people attest under oath to knowledge they don’t have, and it doesn’t matter that in fact there isn’t actual error or discrepancy,” Rhode said. “Any court would take this very seriously.”

Bank of America (BoA) / Foreclosures / Martin Column - 10/10/2010

In this “Bust Bowl,” It’s Every Person for Themselves

During the 1930s, drought and dust storms combined to devastate farms in the heartland of the United States, already decimated by the Great Depression. One quarter of the population of the “Dust Bowl” lost their farms and ranches when the banks foreclosed on them. Millions left the Great Plains for California or elsewhere.

Today, the entire nation is trapped in a “Bust Bowl,” laid low from coast to coast by the collapse of an economy based largely on finance and speculation. The “official” unemployment rate, which has been above 9.5% for the last fourteen months, understates the true devastation wrought by the Wall Street debacle. Vast numbers of our citizens have descended into poverty: 42 million Americans – one in seven – are considered poor. Just an hour or two outside LA, 15 to 20% of residents in towns like Bakersfield and Riverside are below the poverty line.

Back in the Thirties, farmers joined together to protect each other against foreclosures: trying to block authorities from seizing the farms, moving furniture back into the homes of the evicted, and refusing to bid on properties that were foreclosed. But there’s little sympathy for our neighbors evident these days.

To the contrary, speculation has ingrained itself so deeply in the American psyche that people view foreclosures as an opportunity to snatch up a home at distressed prices. And now that some banks are pulling homes off the market because they can’t prove they hold the mortgages, as my colleague Martin Berg has described, would-be purchasers are unhappy. The New York Times quoted a Florida mother who was supposed to move into a foreclosed “three bedroom steal” when Fannie Mae took the house off the market. “Now I’m sharing a room with my son,” she complained. “What the hell is up with that?”

It’s hard to feel sorry for someone who is trying to reap some kind of a windfall from someone else’s tragedy.

I know, everyone’s just trying to get by. The Times noted that one man who had lost his own home to foreclosure after falling behind on his payments had made a successful bid on another foreclosed home – his “dream house” – only to have the deal frozen by the bank.

But is the solution to beggar thy neighbor?

Consider the debt collector profiled in the New Yorker this week. A former drug dealer who did some time, “Jimmy” now runs a small operation in Buffalo, New York. He buys bad debts from businesses like banks and credit card companies for a few cents on the dollar, and then does what he can to collect from the people who owe the money. Anything he can get, he keeps. With so many Americans out of work and deeply in debt, the collection business is booming these days. Buffalo’s home to quite a few such firms these days, because, as Jimmy explains, “Buffalo is broke!” Jimmy’s got five kids and he’s trying to make a living and meet the payroll for his staff, whose job is to nag and cajole people into paying something on what they owe. Plus he’s up against some bigger firms that are willing to break the law in order to collect. But it’s not a pretty picture, especially because it soon becomes clear that Jimmy’s company is in trouble, and he may soon find himself among the debtors of Buffalo.

The average American is not going to be able to leverage himself out of this economic nightmare.

In the Thirties, the federal government ultimately came to the rescue: prodded by Roosevelt, Congress authorized the courts to reduce a farm mortgage to its diminished market value, and to suspend a farm foreclosure for three years. (A conservative US Supreme Court initially struck the law down as an improper intrusion of the government in the banking business, but it was later upheld.) Farmers were also allowed to borrow money through the federal government to pay off their old mortgages. This was the New Deal.

This time around, Wall Street firms have been given access to trillions of dollars of federal money at rates approaching zero interest, but with no requirement that they lend this taxpayer money back to taxpayers at all, much less at fair interest rates. Thus the banks, credit card companies and investment firms are back in business and in fact, most are rolling in dough. The rest of us have to pay exorbitant interest to borrow our money, if it is offered at all. And at the behest of Wall Street, the US Senate rejected a proposal to allow federal bankruptcy courts to modify mortgages so people could stay in their homes. A few days ago, the Obama administration rejected a nationwide moratorium on foreclosures. "While we understand the eagerness to make sure that no American is foreclosed upon in error, we must be careful not to over-reach and apply a remedy that will make the underlying problem of foreclosures worse," according to the Federal Housing Administration.

I'd call this a "Raw Deal."

Foreclosures / Harvey Column / Outrage - 10/10/2010

Money Never Sleeps

Oliver Stone’s sequel to his 1984 hit "Wall Street" opens as the Bubble is about to burst on a culture of material excess that makes Gordon Gekko’s 1980s cell phone – then a symbol of extravagance available only to the mega-rich – ridiculously quaint. Stone’s Wall Street circa 2008 is set in a New York constructed of light, with ubiquitous flat screens providing instantaneous, 24/7 updates on the status of global power and wealth. When the results of decades of speculation first hit the housing market and then the stock markets, the great titans of Wall Street start eating their own. But that was only an appetizer for the main course: the American taxpayer.

I really couldn’t enjoy the love story between Shia LaBeouf and money, much less the one between Shia and his girlfriend, who happens to be Gekko’s estranged daughter and thus presents a trading opportunity for the ambitious young man. As the movie traced the collapse of Bear Stearns and then the stock market into a pile of scrap paper, I got more and more angry.

In one scene, the silver-haired heads of the giant firms that run Wall Street – surrogates for Goldman Sachs, JP Morgan, Citigroup, etc. – cloaked in bespoke suits, are gathered around an ornate table in a wood-paneled conference room with one of their former colleagues, who is now the Secretary of Treasury (aka Hank Paulson), to discuss how much taxpayer money they need in order to stay afloat. Hundreds of billions of dollars are referred to in single digits. The consensus, quickly obtained, was “seven.” It was like the Godfather movies, when the heads of the Families would convene to handle some event that threatened their criminal way of life.

I found myself remembering the scene, in the third Godfather, when small-time hood Joey Zasa locked the conference room doors from the outside, trapping the heads of the Families inside so they could be slaughtered by his assasins.

The nation hardly needs Oliver Stone’s portrayal of the markets as organized crime to stoke people’s recollection of what the debacle did to our economy and our kids’ futures. Our anger has reached a white hot point that, like the sun in a magnifying glass, is now being directed against public officials all over the country. “Money never sleeps” is Gordon Gekko’s new mantra, and vast sums of money are flowing into the political process to influence the November elections - largely an attack on incumbent Democrats in Congress.

But where was all this money back in the third week of September, 2008, when the Bush Administration’s three page proposal to bail out Wall Street with billions in taxpayer money was presented to Congress along with the threat that the United States would collapse if it wasn’t approved on the spot?

In what I must acknowledge was a serious overestimation of the impact one citizen could have at such a moment, I flew to Washington, D.C. on Tuesday, September 23, 2008, thinking I might be able to draw someone’s attention to the sheer lunacy of what was being proposed. Joan Claybrook, the President of Public Citizen, and I held a news conference just outside the House Banking Committee hearing room, where the plan was being presented by the Bush Administration. We were like two voices whispering in a hurricane. Later, I met with members of the California congressional delegation who were in shock and ready to do the bailout deed forthwith. Ok, I said, at least require disclosure of how our money was spent and a quid pro quo: that the companies receiving taxpayer dollars could not loan them back to us for more than a few percentage points profit. The legislators responded to the interest rate cap as if I had proposed that they resign from Congress.

It would have been nice back then if there had been a hugely funded campaign backed by angry Americans telling Congress not to act hastily or stupidly. But in fact, the big money we are seeing now in American politics is not from the grassroots, but from the same greedy folks who caused the debacle in the first place or who profited from the bailout. According to US News and World Report, business and conservative backed organizations are behind the “independent expenditure” campaigns that are targeting Democrats and outspending them two to one. A recent article in the New Yorker uncovered two extremist billionaire brothers funneling over $100 million from their family oil business into Tea Party non-profits. Long-time big business Republican operatives like Karl Rove (now running a group called "American Crossroads") and Dick Armey ("FreedomWorks") are supplying more than tea for the new tea party.

The sudden resurgence of interest in politics on Main Street would be cause for great celebration, and the opportunity for real change, as citizen leader Jamie Court writes in his new primer on political activism: “The Progressive’s Guide To Raising Hell.” Instead, it’s just another dismaying example of big money corrupting our political system. If it succeeds, get ready for more speculation, more bubbles, and more pain for the average American.

"Greed is good," Gekko said back in the day, but Wall Street needs to own Washington, and Wall Street is already projecting victory in November. Commenting on the rise of the Dow in September, an analyst said, "’There is a good chance that the strength we have seen in the market recently is due partly to an expectation about the result of the election... Investors are starting to understand that a likely result of this election is gridlock, and that is good."

Harvey Column / Outrage - 10/03/2010