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Did Servicers Commit Fraud So Banksters Could Get Big Bonuses?

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When I asked yesterday about the relationship between the stress tests and the servicers’ foreclosure fraud, I had a hunch that the banksters might have been committing that fraud so as to be able to show financial viability so as to be able to repay TARP funds so as to escape the oversight of the government. I wondered whether the stress tests were not just a means by which the government should have exercised some control over the servicers that they already knew to be having problems, but were also one reason the servicers were pushing for the most profitable outcomes (including choosing to foreclose rather than modify loans).

Rortybomb, who knows a lot more about how this stuff worked than I do, provides these damning details:

For what it is worth, I’m sure those conducting the stress test knew that this conflict existed and knew that it was very profitable to the banks. Servicing is considered a “hedge”, because as the origination business dries up foreclosures will increase and servicing income would go up, something Countrywide and others loved to talk about.

Let’s go to a Countrywide Earnings call from Q3 2007:

Now, we are frequently asked what the impact on our servicing costs and earnings will be from increased delinquencies and lost mitigation efforts, and what happens to costs. And what we point out is, as I will now, is that increased operating expenses in times like this tend to be fully offset by increases in ancillary income in our servicing operation, greater fee income from items like late charges, and importantly from in-sourced vendor functions that represent part of our diversification strategy, a counter-cyclical diversification strategy such as our businesses involved in foreclosure trustee and default title services and property inspection services.

The servicing operation will “fully offset” lost income from increased delinquencies and lack of origination business. This is by design. It’s tough to find good counter-cyclical strategies, but this appears to be one. If you were both TBTF and really in need of cash, could you squeeze this a bit further, say by violating the rule of law?

[snip]

Someone enterprising on the hill could ask how the servicing income was incorporated into the stress test and how predictive it was in the adverse scenario case. Things like this make it even more important that the government takes a strong hand in rooting out foreclosure fraud.  We cannot allow an impression to form that we collectively looked the other way at issues of foreclosure abuse, issues well documented since before the stress test, because this business line is one of the few profitable things available to TBTF firms.  TBTF firms that needed cash, were (and are) backstopped by taxpayers and wanted to get out of TARP to issue bonuses.   Nobody gets to be above the law, regardless of how systemically important they are or whatever numbers needed to be hit on the stress test.

In other words, going back to 2007, mortgage companies were upfront in claiming that their servicer-related profits served to offset their loan losses. That’s not to say they would have argued that in their stress test results (again, I’m not expert on this, but I’m not even sure that the stress tests looked at the servicer income). But it does say that to prove viability–to make a half-credible claim they weren’t insolvent and to evade restrictions on bonuses and political giving–they had an incentive to suggest their servicer income was enough to offset a significant chunk of their loan losses. That not only gave them a huge incentive to keep servicer costs low (by doing things like hiring WalMart greeters and hair stylists to serve as robo-signers), but it also increased the incentive to increase profits as a servicer by refusing to modify loans.

So I’d go further than Rortybomb in calling for some enterprising Hill person to look into this. Given that we know Timmeh Geither, campaigner against injustice, was officially warned and knew about this conflict, I’d like to know how much he knew about this hedge. The Administration now says it was helpless to stop this kind of fraud, yet it chose not to use at least two sources of leverage (cramdown and stress tests) to control it. Is that because they knew the servicer fraud was an important part of extend anad pretend?

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Dems Not Only Call for National ID, but for Anti-Democratic National ID

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As DDay reported, the Reid-Schumer-Menendez draft on Immigration Reform calls for a national ID card (which they call a “biometric” or “fraud proof” social security card). Perhaps in a move to placate civil libertarians, the draft insists the card will only be used for employment.

It will be unlawful for any person, corporation; organization local, state, or federal law enforcement officer; local or state government; or any other entity to require or even ask an individual cardholder to produce their social security card for any purpose other than electronic verification of employment eligibility and verification of identity for Social Security Administration purposes.

Now, let’s pretend for a moment that this national ID program would actually fix the problem of employers trying to hire cheap, vulnerable labor rather than paying market rate wages. Let’s pretend for a moment that this national ID program would avoid all of the security and privacy issues that such a program will be bound to have.

Why in fuck’s name would anyone with a “D” next to their name advocate for a national card–of any sort–without at the same time attaching it to automatic voter registration, also tied to the card? Why would the Democratic party propose any national program that did not, at the same time, insist on getting rid of our byzantine voter registration system that leaves large chunks of the population exposed to disenfranchisement? Even if this is just a stunt designed to prove Democrats are “serious” about compromise so they can embarrass the bigots even more for their refusal to accept the compromise, why would you ever miss the opportunity to tie a universal registration card to a potential fix to the problems in our election system?

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The Chuck and Huck Show

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Say, have you noticed how often Chuck Schumer has been nuzzling up to Lindsey “Huckleberry” Graham lately?

There’s their plan on immigration reform which, among other things, calls for a national biometric ID card.

And there’s a bill to pressure China on currency manipulation.

I raise this for two reasons. First, Huck’s efforts to institutionalize indefinite detention thus far lack a real legislative champion. At the same time, Chuck’s flip-flop on 9/11 trials in NYC was one of the key reasons that plan failed. So I worry that Chuck will be the guy who gives Huck’s Constitution shredding a liberal face (and why not, if you’re already instituting national ID cards).

Of course, this is all happening against the background of a potential Majority Leader fight next year if Harry Reid loses his re-election bid. Chuck seems to be prepping a run on bipartisan effectiveness. With an eye at least partially on the Majority Leader run, after all, Chuck negotiated a deal with Orrin Hatch that ended up being the only jobs bill passed this year (though of course it won’t really do squat for jobs because it is far too small, and it may well endanger social security in the long run.

I have long thought Chuck would make a badly flawed (because Wall Street owns him, and because his moral compass blows with the wind) but effective (because a significant proportion of Senators owe their seat to him, and because he has the ability to throw big fundraising dollars to Senators) Majority Leader. Moreover, no matter whether I like it or not, I do think he’s the most likely person to replace Reid, if it comes to that.

Which is why I think it all the more important to start cataloging the way that Chuck’s efforts to rack up a quick record of bipartisan success compromise on bedrock Democratic principles.

You know … things like the Constitution.

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Republicans Prepare to Kill Jobs; Democrats Angle for Majority Leader

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Brian Beutler reports that the Republicans are prepping to make sure no additional support for jobs gets passed next week.

Senate Democrats want to vote on the first installment of a jobs package as early as Monday, amping up the pressure on Republicans to get aboard. But for the moment, they’re not biting.

“We’ll have a vote on a jobs bill on Monday,” Senate Majority Leader Harry Reid said at a press conference today.

There’s just one wrinkle: According to the Senate’s top vote counter, there is currently no Republican support for the proposal Democrats are putting forth–and with Scott Brown to be seated today as the 41st Republican Senator, they’ll need at least one member of the minority to come aboard.

“You need two to tango. And you need Republicans for bipartisanship,” said Senate Majority Whip Dick Durbin (D-IL).

Now, there’s an interesting subplot to this.

Current Majority Leader (and very endangered incumbent) Harry Reid says no Republicans currently support the bill.

Majority Whip and second-most senior Democratic Senator Dick Durbin suggests there are no Republicans supporting the bill.

Meanwhile, Vice Chairman and third-most senior Democratic Senator Chuck Schumer has been working on a deal–at least for tax credits for businesses that create jobs–with Republican Orrin Hatch.

Sens. Chuck Schumer (D-N.Y.) and Orrin Hatch (R-Utah) released a plan Wednesday to give tax breaks to companies that add new workers, a proposal that is likely to become a key component of the jobs bill Senate Democratic leaders are hoping to unveil this week.President Obama has called for employers to receive a $5,000 tax credit for each new employee they hire, while other lawmakers have floated different proposals for a job tax credit. The Schumer-Hatch plan, which would allow companies to avoid paying Social Security taxes for the duration of 2010 on each unemployed worker they hire, appears to have the most momentum in the Senate.

“Our payroll tax cut is a simple, cost-effective and bipartisan solution. It will help put more Americans to work right away,” Schumer said in a press release. Hatch added: “While Senator Schumer and I disagree on most issues, we’ve been able to come together on an affordable, effective and targeted proposal to get the American people back to work.”

Democratic leaders emphasize that they haven’t yet settled on an exact combination of items that will go in the Senate’s jobs package, but Senate Majority Leader Harry Reid (D-Nev.) suggested Wednesday that he was taking a close look at the Schumer-Hatch bill.

Mind you, the Schumer-Hatch deal only deals with one aspect of the deal, not with things like COBRA subsidy extension. And I’ve got concerns about any plan that defunds social security.

Nevertheless, it seems that the drama over whether Democrats will squabble themselves into irrelevance–and/or whether Republicans will sacrifice the interests of their constituents for partisan gain is playing out large on the jobs front.

Whatever is happening, it is preventing Americans from getting back to work.

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Chuck Schumer to Bloggers: “Fuck You”

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Jay Rosen first pointed me to the news that Chuck Schumer is aiming to declare all us DFH bloggers non-journalists before the law.

For citizen journalists, the federal shield law front was looking good for a while.  Although the House of Representatives version of the bill, passed in April, only offered a shield to professional bloggers, the Senate version didn’t differentiate between the pros and the amateurs.  So there was hope that amateur journalists might actually, eventually, get its protection.

No longer though.

Sadly, the Senate Judiciary Committee has followed the path of the House and opted to specify that only a "salaried employee . . . or independent contractor" will be able to invoke the shield, reports the Wall Street Journal’s Digits blog.  The amendment, offered by Sen. Chuck Schumer (D) of New York, limits the definition of a journalist to one who:

(iii) obtains the information sought while working as a salaried employee of, or independent contractor for, an entity—

(I) that disseminates information by print, broadcast, cable, satellite, mechanical, photographic, electronic, or other means; and

(II) that—

(aa) publishes a newspaper, book, magazine, or other periodical;

(bb) operates a radio or television broadcast station, network, cable system, or satellite carrier, or a channel or programming service for any such station, network, system, or carrier;

(cc) operates a programming service; or

(dd) operates a news agency or wire service . . . 

This language is in fact more restrictive than its House counterpart, which only limits the shield to those who gather or disseminate news "for a substantial portion of [their] livelihood or for substantial financial gain."  The Judiciary Committee’s "salaried employee . . . or independent contractor" language on its own would be sufficient to deprive most non-traditional journalists of protection.  But the requirement that the hosting entity both disseminate information by electronic means and operate a publishing, broadcasting, or news service of some kind ices it.

So to be a journalist in Chuck Schumer’s eyes, you have to both have a boss (at this point, you generous readers and Jane would count as my boss, but Jane doesn’t have a boss, for example) and that boss’ company must disseminate news on some other medium, in addition to the Toobz. Read more →

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Chuck Schumer for Majority Leader

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Update: I’ve been reliably informed that Schumer made the comments to the NYT on Thursday, before his Friday meeting with POTUS.

Since I’ve been obsessing about all the excess brush in TX now that we have a President who insists on working in August, I’ve been tracking Obama’s schedule very closely. And so I noticed on Friday that Chuck Schumer had a late afternoon meeting in the Oval Office that was closed to the Press.

Just Chuck Schumer.

I found that rather odd, since Schumer’s Chairmanship–of Rules–isn’t necessarily one that would be of interest to the President. Unlike the House, for example, the Senate Rules Committee isn’t going to have significant say over how a bill–health care, for example–comes up for a vote. [Update: I’m increasingly convinced this is wrong: Rules might be critical if they tried to do health care in reconciliation.]

And while there are a number of things buzzing in NY–notably, the confirmation of NY’s Sonia Sotomayor and US Attorney and former Schumer aide Preet Bharara–that might concern both the White House and NY’s senior Senator. But on a lot of those issues, some other Committee Chair would be involved (such as Pat Leahy for judiciary issues), which make it less likely that’s what the White House wanted to chat to Schumer and just Schumer about. Furthermore, some issues (such as Carolyn Maloney’s decision not to challenge Kristen Gillibrand) would be more appropriate in a non-official venue.

So I’ve been assuming that Schumer got called to the White House because he has a unique ability to get things done in the Senate. That’s partly by virtue of his past tenure as DSCC Chair; thirteen Senators owe their position to Schumer, including a number of moderates (Sheehan, Warner, Hagen, Franken, Udall, Udall, Merkley, Begich, McCaskill, Webb, Tester, Brown, Casey, and Whitehouse). He’s the kind of guy who, if he were majority leader, would be tremendously effective and would have a lot of chits to call in on key legistlative battles. Oh, and he’s also on the Finance Committee–the committee on which six totally unrepresentative Senators are holding healthcare hostage.

Which is why I’m curious to see these comments from Schumer. (h/t Americablog)

“If they can’t do it by Sept. 15th, I think the overwhelming view on the Democratic side is going to be, then, they’re never going to get it done,” Senator Charles E. Schumer, Democrat of New York, observed in a separate interview. “And there’s always a worry that, you know, delay, delay, delay, you lose any momentum whatsoever.”

Read more →

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Alberto Gonzales Tells the Tale We've Been Waiting For

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Alberto Gonzales did a long interview with NPR’s Michel Martin on his tenure as Bush’s Fredo. As part of it, he gave a long discussion of his actions on March 10, 2004 and thereafter, starting with his insistence that he was not trying to take advantage of Ashcroft when he was in ICU (my transcript–apologies in advance for any errors). 

AGAG: Neither and or I, and obviously, I can’t really speak for Andy, but I’m comfortable saying that neither Andy or I would have gone there to take advantage of someone who was sick. Um, Andy and I both, in fact, talked about the importance of satisfying ourselves as we talked with General Ashcroft that he was in fact competent. We talked about it over at the White House and talked about it in the sedan over to the hospital. We were concerned about that. We were sent there on behalf of the President of the United States. We had just left a very important meeting with the Congressional leadership about a very important intelligence program that the Congressional leadership agreed with the President should continue because it was a particularly heightened period of threats against the United States and against our allies. And I might remind your listeners that the very next morning, you had the Madrid train bombings. It was a very serious period of time, we had a very important program, and everyone–the Congressional branch leadership and the Executive branch leadership seemed to feel that this was something that should continue.

MM: Are you saying the President told you to go?

AGAG: What I’m saying is I was sent there on behalf of the President of the United States. The Chief of Staff, the Counsel to the President, we went to the hospital on behalf of the President to make sure that General Ashcroft had this information. That’s why we went to the hospital.

MM: You mean had information about the Madrid bombing or had information that this was of importance to the President and the Congressional leadership?

AGAG: The Madrid bombing had not happened yet. That would happen then the next morning. We went to the hospital to make sure that the Attorney General had information about the approval of the Congressional leadership. We felt that as a former Member of Congress that that would make a difference for him and as someone who had been involved in the reauthorization of the program for three years we felt that that would make a difference. Read more →

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Speaking as the Owner of a Perfect Storm Cap

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I’m glad Howard Dean didn’t let Chuck and Rahm claim all the credit for a big victory again, like they did in 2006.

This has been a truly historic, transformational election.  Tonight, our country chose hope over fear, the future over the past, unity over division.  This election also reflects the passing of the torch to a new generation.  Barack Obama inspired young voters across this country to answer the call and get involved.  They responded to his promise to put partisanship and divisiveness aside and come together as one nation to find solutions.  They turned out. They made calls. They knocked on doors. And they helped change our country.

The American people have given all of us – Democrats, Republicans and Independents – a simple mandate: to work together find big solutions to the big challenges facing our country.  We must work together to change the direction of our wonderful country and to restore America. With the help of strong Democratic majorities in Congress, President Barack Obama is going to set this nation on a course to provide the change we need.

Today I am humbled by what we have accomplished over the last four years. Together, we can build on this moment to bring our nation together and work as one to overcome the challenges we face. It is what we as Americans have always done.  Under Barack Obama’s leadership, we’ll do it again. [my emphasis]

 Though he didn’t exactly boast about how Obama won by following in Dean’s 50 State Strategy path.

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No Consequences for the Wholesale Politicization of Justice

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Glenn Fine, DOJ’s Inspector General, showed up before the Senate Judiciary Committee today to talk about the two reports showing pervasive politicization of the Department of Justice.

The big take-away from the hearing–which reinforced what was already evident from the reports–is that those who politicized DOJ have basically gotten away with it: Monica Goodling, Kyle Sampson, Mike Elston, and others will not be held accountable for their actions.

For example, when Chuck Schumer asks Fine about consequences, Fine says the lawyers involved (and not all of them were lawyers) may–possibly–face sanctions from their Bar.

Schumer: On of the most shocking conclusions in your report is that someone like Monica Goodling, who politicized the appointment of Assistant US Attorneys, Immigration Judges, and even Counter-Terrorism positions may not face any consequences for her actions. So let me ask you this, Mr. Fine. Should such blatant politicization and illegal activity be subject to some criminal punishment so there would be some ultimate accountability.

Fine: I’m not sure it’s true to say she escaped any accountability and punishment. As I discussed with Senator Whitehouse earlier, she–people did leave the Department, so they can’t be disciplined by the Department, but we’ve recommended that they never get a job with the Department again and hopefully with the federal government again and that hopefully they consider this report if they ever do reapply. They have been exposed. Their conduct has been exposed in a transparent way for all to see. And then, there may be–I’m not saying there is but there may be appropriate Bar sanctions for–possibly–for attorneys who have committed misconduct and may have violated a Bar rule and so the Bar may look into that.

Sheldon Whitehouse follows up on Schumer’s questions to ask for specifics, looking for some means to hold these guys accountable. Whitehouse seems to be pointing to something bmaz has talked about (update: see this comment)–the difficulty in identifying the Bar rule that such misconduct might have violated.

Whitehouse: Um, with respect to the consequences for the violation of federal law. Can you identify what Bar rules might have been broken. … I did not see OPR making any referrals to the Disciplinary Council as a result, so I’m a little confused about what disciplinary consequences lawyers might face?

Fine: My understanding is, and I’ve had discussions with OPR about this, that OPR intends to, and we will participate in a notification to the Bars of individuals who are found to have committed misconduct, for them to review the conduct. Read more →

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FISA Liveblog

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Reid is on the floor talking about what votes we’ll have tomorrow:

Immunity
Substitution
Exclusivity

Argh. This means we won’t have 60 there for exclusivity.

Reid and Mitch McConnell had some back and forth on the stimulus package.

Kit Bond:

Thank colleagues for agreeing to a way forward on this bill. Hehehe, it would do no good to pass a good that is good for politics, but does not do what those who protect our country need. With these fixes we’ll have a bill the President will sign.

Shorter Kit: this is very very technical and so we’ve decided to just do away with Congressional review and, while we’re at it, privacy. What Mike McConnell wants, Mike McConnell gets.

Whitehouse:

In this debate about revising FISA and cleaning up the damage done by the President’s warrantless wiretap program, the Administration expends all its rhetorical focus on what we agree on.

On what terms will this Administration spy on Americans?

The privacy of Americans from government surveillance.

Both Chairmen–Leahy and Rockefeller–have given it their blessing.

As former AG and USA, I oversaw wiretaps, and I learned that with any electronic surveillance, information about Americans is intercepted incidentally.

In domestic law enforcement, clear ways to minimize information about Americans. Prospect of judicial review is an important part of protecting Americans. Bond and Rockefeller have already put into the bill that the authority to review the minimization if the target is an American inside the US. But as will often be the case, the target will often be outside the US. An American could just as easily be intercepted in these situations. This protection (review of minimization) should apply when the intercepted It makes no sense to strip a court based on the identity of the target. It may be that if there’s litigation that a court will decide that it is implied. The mere prospect of judicial review has a salutary effect. The opposite is true as well, when executive officials are ensured that a Court is forbidden to police enforcement, then they are more apt to ignore compliance. Both here, where the FISA bill creates an unheard of limit on Court powers, and in the immunity debate, where we intercede to choose winners and losers. Bad precedent for separation of powers. Those of you who are Federalist Society members should be concerned about this absence of separation of powers. Read more →

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