not to be used for bribing politicians
(image by torbakhopper)
Reprinted from neweconomicperspectives.org
Every day brings multiple new scandals. At least they used to be scandals. Now they're simply news items strained of ethical content by business journalists who see no evil, hear no evil, and speak not about evil. The Wall Street Journal, our principal U.S. financial journal ran two such stories today. The first story deals with tax evasion, and begins with this cheery (and tellingly inaccurate) headline: "U.S. Banks to Help Authorities With Tax Evasion Probe." Here's an alternative headline, drawn from the facts of the article: "Senior Officers of Goldman Sachs and Morgan Stanley Aided and Abetted Tax Fraud by Wealthiest Americans, Failed to Make Required Criminal Referrals, and Demanded Immunity from Prosecution for Themselves and the Banks before Complying with the U.S. Subpoenas: U.S. Department of Justice Caves in to Banker's Demands Continuing its Practice of Effectively Immunizing Fraud by Most Financial Elites."
Oh, and the feckless DOJ (again) did not require any officer who committed the felony of aiding and abetting tax fraud to resign or to repay the bonuses he "earned" through his crimes. But not to worry, the banks -- not the bankers -- may have to pay fines as the cost of doing their felonious business. The feckless regulators did not even require Goldman Sachs and Morgan Stanley to disclose to shareholders their participation in the program.
Best of all, the "cooperation" the banks will offer will be of vastly reduced value because under Swiss law they will not report the names or any identifying information of the wealthy U.S. taxpayers that they helped commit felonies. But not to worry says DOJ:
"'Through the program, as well as through ongoing investigations and other law enforcement tools, we are confident that we will obtain information that will lead us to account holders who have thought for too long that they can keep hiding,'" said Dena Iverson, a Justice Department spokeswoman.
And did I mention that there was an U.S. amnesty program for wealthy U.S. tax cheats who used Swiss banks to commit their felonies?
Note that this aspect of Switzerland's deliberate national policy of aiding tax evasion by the world's wealthiest tax cheats fits into the article I wrote earlier this week about Dr. Hans Geiger's rage that FATF is seeking to require banks to make criminal referrals against tax cheats. Geiger is a leader in a Swiss movement to block that requirement. He has also written that requirements that the banks file criminal referrals when they discover evidence indicating that they may have aided money laundering, the funding of terrorists, or international sanctions busting should be eliminated.
The Ethics-Free WSJ Story on the Regulator's Latest Betrayal of Homeowners
The context of this WSJ story is the broader series of betrayals of homeowners by the regulators and prosecutors led initially by Treasury Secretary Timothy Geithner and his infamous "foam the runways" comment in which he admitted and urged that programs "sold" as benefitting distressed homeowners be used instead to aid the banks (more precisely, the bank CEOs) whose frauds caused the crisis. The WSJ article deals with one of the several settlements with the banks that "service" home mortgages and foreclose on them. Private attorneys first obtained the evidence that the servicers were engaged in massive foreclosure fraud involving knowingly filing hundreds of thousands of false affidavits under (non) penalty of perjury. As a senior former AUSA said publicly at the INET conference a few weeks ago about these cases -- they were slam dunk prosecutions. But you know what happened; no senior banker or bank was prosecuted. No banker was sued civilly by the government. No banker had to pay back his bonus that he "earned" through fraud.
Naturally, the WSJ provides none of that context, but what the article does discuss remains a travesty. It is entitled "GAO: U.S. Foreclosure Review Could Have Generated Higher Payments: Review Could Have Delivered $1.5 Billion More to Consumers if Not Halted, Federal Watchdog Finds."
I've added emphasis to the dishonest euphemisms the WSJ employs (and quotes) for the "f" word (fraud).
- "The Government Accountability Office, in a report being released Tuesday, evaluated federal bank regulators' decision last year to cancel a prolonged review of foreclosure-processing and loan-assistance mistakes."
- "The GAO report shows that the settlement 'was reached without adequate investigation into the harms committed by the servicers,' Rep. Maxine Waters (D., Calif.) said in a prepared statement."
- "'Many of the files did not contain complete data, making it impossible to know whether borrowers were disqualified from the possibility of the greatest cash payouts' [the WSJ quoting Water's prepared statement]."
- But finishing this process would have been a long and complicated affair. Doing so, the GAO said, would have taken up to two more years for consulting firms to scour thousands of foreclosure files for errors, at a cost to banks of about $4.6 billion.
- The foreclosure review was ordered three years ago by the Office of the Comptroller of the Currency and the Federal Reserve, which told banks to hire independent consultants to evaluate allegations the firms used shoddy practices when handling a huge volume of foreclosures during the housing bust.
Sadly, I tend to read the underlying documents and the truly bad news is that the GAO report uses the "f" word only once and is otherwise a mass of euphemisms. This sentence will give you an accurate flavor of the Report.
"In September 2010, allegations surfaced that several servicers' documents in support of judicial foreclosure may have been inappropriately signed or notarized" [GAO 2014: 7, emphasis added].
In addition to the euphemisms and the fact that the sentence reads like it was written by the banks' criminal defense counsel, it is a sentence crafted to mislead. By that time there were sworn statements by a series of servicer personnel admitting that their offices engaged in systematic foreclosure fraud through filing affidavits that were known to be false. They admitted to tens of thousands of criminal acts by their organizations.
The one time the GAO uses the word fraud is to report that the foreclosure payout program carefully protects itself from fraud by the victims -- by providing that the checks expire after 90 days [GAO 2014: 34 n. 51]. In a very dark Irish humor kind of way I find this hysterically funny. By contrast, when the GAO discusses real frauds the passage again reads as if it were drafted by the bank's criminal defense lawyers.
"Failure to review documents filed in support of a judicial foreclosure may violate consumer protection and foreclosure laws, which vary by state and which establish certain procedures that mortgage servicers must follow when conducting foreclosures" [GAO 2014: 7 n.13].
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