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Gang of Transnational Crime Organizations Roll Out Own Encrypted Communication System

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When Michael Chertoff made the case against back doors, he noted that if the government moved to require back doors, it would leave just the bad guys with encrypted communications.

The second thing is that the really bad people are going to find apps and tools that are going to allow them to encrypt everything without a back door. These apps are multiplying all the time. The idea that you’re going to be able to stop this, particularly given the global environment, I think is a pipe dream. So what would wind up happening is people who are legitimate actors will be taking somewhat less secure communications and the bad guys will still not be able to be decrypted.

I doubt he had the Transnational Crime Organizations on Wall Street in mind when he talked about the bad guys “still not be able to be decrypted.”

But HSBC, JP Morgan Chase, Citi, Deutsche Bank, Goldman Sachs and the other big banks supporting Symphony Communications — a secure cloud based communications system about to roll out — are surely among the world’s most hard-core recidivists, and their crime does untold amount of damage to ordinary people around the globe.

Which is why I’m so amused that Elizabeth Warren has made a stink about the imminent rollout of Symphony and whether it will affect banks’ ability to evade what scant law enforcement might be thrown their way.

I have [] concerns about how the biggest banks use of this new communications tool will impact compliance and enforcement by the Department of Justice [Warren sent versions of the letter to 6 regulators] at the federal level.

My concerns are exacerbated by Symphony’s publicly available descriptions of the new communications system, which appear to put companies on notice — with a wink and a nod — that they can use Symphony to reduce compliance and enforcement concerns. Symphony claims that “[i]n the past, communication tools designed for the financial services sector were limited in reach and effectiveness by strict regulatory compliance … We’re changing the communications paradigm” The company’s website boasts that it has special tools to “prevent government spying,” and “there are no backdoors,” and that “Symphony has designed a specific set of procedures to guarantee that data deletion is permanent.”

Warren is right to be concerned. These are serial conspiracists on a global scale, and (as Warren notes elsewhere) they’ve only been caught — to the extent that hand slaps count as being caught — when DOJ found the chat rooms in which they’ve colluded.

That said, the banks, too, have real reason to be concerned. The stated reason they give for pushing this project is Bloomberg’s spying on them — when they were using Bloomberg chat — for reporting reasons, which was revealed two years ago. The reference to government spying goes beyond US adversaries, though I’m sure both real adversaries, like China, and competitors, like the EU, are keeping watch on the banks to the extent they can. But the US has spied on the banks, too. As the spy agency did with Google, the NSA spied on SWIFT even though it also had a legal means to get that data. I wouldn’t be surprised if the rise in bank sanctions violations in recent years stemmed from completely necessary spying if you’re going to impose sanctions, but spying that would compromise the banks, too. Remember, too, that the Treasury Department has, at least as of recently, never complied with EO 12333’s requirement for minimization procedures to protect US persons, which would include banks.

And there have even been cases of hacker-insider trader schemes of late.

So banks are right to want secure communications. And while these banks are proven crooks — and should be every bit the worry to Jim Comey as ISIS’s crappier encryption program, if Comey believes in hunting crime — the banks should be reined in via other means, not by making them insecure.

If we’re going to pretend — and it is no more than make-believe — that the banks operate with integrity, then they need to have secure communications. But without that make-believe, a lot of the important fictions America tells itself about capitalism start to fall apart.

Which is my way of saying that the 6 regulators need to think through how they can continue to regulate recidivist crooks who have their own secure messaging system, but that the recidivist crooks probably need a secure messaging system (though having their own might be a stretch).

If Jim Comey is going to bitch and moan about criminals potentially exploiting access to encrypted communications, then he should start his conversation with the banks, not Apple. If he remains silent about this gang and their secure communications, then he needs to concede, once and for all, that actual humans need to have access to the same privilege of secure communications.

On this topic, see also District Sentinel’s piece on this.

 

HUD Digs an Escape Tunnel for Jamie Dimon

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The other day I dismissed US disdain for Mexico at its inability to keep Chapo Guzmán jailed. After all, I pointed out, we don’t even try to imprison our Transnational Crime Organization bosses.

At the Intercept yesterday, DDay pointed out another example. After JP Morgan Chase and Citigroup pled guilty to forex fraud, the Department of Housing and Urban Development “changed their form” for FHA insurance, so as to permit those TCOs to continue to have taxpayers insure their customers’ loans.

On May 20 of this year, JPMorgan Chase and Citigroup both entered a guilty plea on one felony count of conspiring to rig foreign currency exchange trades, the largest market on the globe.

Five days earlier, on May 15, HUD slipped a notice into the Federal Register, seeking to alter its standard loan-level certification form, known as HUD-92900-A. This form must be filled out for lenders to receive FHA insurance, which reimburses them if the homeowner falls into foreclosure.

On the current HUD-92900-A form, lenders must certify that their firm and its principals “have not, within a three-year period … been convicted of or had a civil judgment rendered against them” for a variety of crimes, including “commission of fraud … violation of Federal or State antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements or receiving stolen property.”

JPMorgan and Citi’s guilty plea would fall under the antitrust statute, and according to Brown, Warren and Waters’ reading of the certification, that would make them ineligible to obtain FHA insurance on their loans.

On the updated form, this language has been excised.

As Senators Sherrod Brown and Elizabeth Warren and Congresswoman Maxine Waters read it, this will eliminate what should have been one of the biggest impacts of the TCOs’ guilty plea.

Again, Jamie Dimon’s tunnel may not be so spectacular as Guzmán’s. But that’s partly because even more parts of government are helping him to escape any punishment for his TCO’s crimes.

Behind the Humble Blue Pickup Scott Brown Has Been Working for Banks with Ties to Home-Stealing Forgers

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Remember when Scott Brown used his old GMC pickup to promise he’d change business as usual in Washington?

In a bid to force Elizabeth Warren to reveal her clients going back decades, Brown made this admission.

“I am also a real estate attorney with a very small general practice. I don’t have any corporate clients, where I get paid tens of thousands of dollars.”

Mostly, he said, his local legal work involved property closings and real estate transactions. He said he has worked for Wrentham Cooperative Bank, Hyde Park Cooperative Bank and Middlesex Savings Bank.

“I was a title agent for first American and Fidelity National Title and I represented a couple of small mortgage companies that are probably out of business now,” Mr. Brown said. [my emphasis]

As Adam Levitin and DDay translate, by working for Fidelity National, Brown worked for the parent company of one of the most corrupt players among the rogues gallery of mortgage fraudsters.

Fidelity National is the former parent company of LPS, one of the worst offenders in the foreclosure fraud industry. Fidelity National split with LPS very quickly once their worst abuses came to light.

As I’m sure you can gather from my reports here, LPS was a middleman in this game, providing faulty documents – often off a prescribed menu, where you pay $100 for a mortgage assignment, or $150 for a full loan file – through its subsidiary DocX. This company facilitated forgeries and mass false documents, which we know through Lynn Szymoniak’s work. The Linda Green phenomenon came right out of LPS and DocX. This is where robo-signing lived.

And while we don’t know what Brown did–or still does!–for Fidelity National, it does place him in the front seat of the housing bubble.

It’s not clear exactly what Brown was doing for these clients–title work sounds innocent and boring enough, and Brown certainly isn’t responsible for all of his clients’ misdeeds.  But at the very least, Brown’s association raises a host of questions. Who were those “mortgage companies” that he worked for?  It’s nice that Brown named a bunch of local banks, but I wonder what lies under the “mortgage company” label?  What did Scott Brown understand about the mortgage market he was facilitating? Did he recognize that there was a bubble?  (He was a town property assessor at one point, so one would think he’d notice this sort of thing.) If not, what does that say?  And if so, what does thatsay? How many predatory loans did Scott Brown facilitate?  How many of the loans where he handled the closing resulted in foreclosure?  What would he say to those families that lost their homes to predatory loans?

Since Brown first raised these nice homely local banks with ties to document forgers in a bid to force Warren to explain more about how she helped people get asbestos settlements and other things, I’m sure he’ll have no problem answering Levitin’s questions about precisely what he did and knew about the mortgage industry. Ha! And, as DDay notes, he should also answer for the conflicts of interest that led him to hold up some financial reform.

He held out in the [financial reform] bill, getting a bank fee removed that would have paid for much of the regulatory measures, and weakening the Volcker rule to allow more proprietary trading among big financial institutions. So Brown was a cog in the great finance wheel when doing these closings and “title work,” and also when a US Senator trying to enable as much profit-earning risk in the big financial institutions as possible. A useful cog.

Before Scott Brown digs up work Warren did years ago, he probably ought to elaborate on this nice homey mortgage work, and let us know whether he was ignorant to the corruption around him, or just facilitating it. After all, he’s the guy insisting on transparency .

Most Blunt Amendment Supporters Likely to Have Used Birth Control

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I confess. I’m contemplating calling all the Senators who voted for the Blunt Amendment yesterday to ask for a statement detailing:

  • What the Senators’ history of reproductive choice has been, including details on what kinds of birth control they’ve used and who paid for it
  • Whether the Senators (or their spouses) have used erectile dysfunction drugs, and who paid for it

Mind you, I think such questions are inappropriate. But given that 48 Senators–including 3 Democrats and 4 women–voted yesterday to say that employers should have really intrusive control over their employees’ healthcare decisions (including, but in no way limited, to reproductive health), it seems fair to at least inquire whether these men and women have been relying on birth control to plan their families, whether their use of birth control violates their religion’s stated doctrine, and whether taxpayers paid for birth control during their child-bearing years.

As you can see from the list below, the vast majority of Senators who voted for the Blunt Amendment are likely to have relied on birth control or sterilization to limit their family size. Just three–Susan Collins, Kay Bailey Hutchison, and Lindsey Graham–have no biological children. And just three–Mike Crapo (5), Chuck Grassley (5), and Orrin Hatch (6)–have more than 4 biological children (McCain and Blunt have more with their adopted kids). Of those likely to have used birth control or sterilization, 22 worked for local, state, or federal government during a roughly calculated “child-bearing” period of their life, meaning taxpayers may have paid for their birth control (though of course their spouses’ employers may have provided health care, too). Of those likely to have used more than the rhythm method, 10 are Catholic.

So I’m going to contemplate this over the weekend. But for the moment, consider that the great majority of the Senators who voted to let employers restrict birth control access seem to have families that have been shaped by birth control.

Note the following details are a first draft–please let me know of any inaccuracies.

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Eric Schneiderman: Foreclosure Settlement “Down Payment”

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Given that we’re talking about some relief for homeowners who are so far underwater that they’ve completely lost the value of the down payment they paid on their homes, I thought NY Attorney General Eric Schneiderman’s use of the phrase “down payment” to be a curious way to describe that he considers this settlement just the first step toward achieving justice.

Down payments don’t have the kind of value they used to have.

Perhaps the most interesting thing Schneiderman said other than that, though, was he thought they’d get some relief from MERS through legal means, and therefore wouldn’t need any legislation about MERS. Does that mean he thinks he can shut down MERS with his suit? Let’s hope so. That would go a long way to fix the problems in our mortgage system.

Other than that, he offered little explanation of my two main questions about this: 1) how he expects to get to the underlying problems with mortgages–the securitization problems–without using the robosigning efforts as a way to work up a chain to a real prosecution and 2) how letting banks off the hook for fraud and forgery doesn’t encourage more of the same?

In his press conference–and at more length in an interview with Greg Sargent–he said we skeptics should believe that Obama (now) takes this seriously because of assurances he gave Schneiderman and the emphasis he gave it at the SOTU.

Asked if progressives should be skeptical of the administration’s assurances, given the lack of accountability so far, Schneiderman insisted that Obama’s private and public assurances have left him convinced he is serious about a real accounting.

“He took ownership of this,” Schneiderman. “Sometimes people on the left have to take yes for an answer. The President is accepting the challenge. It’s time for progressives to say, `okay, he’s moving with us now, he’s using resources of government to aggressively pursue the malefactors of great wealth, as Teddy Roosevelt put it.’”

Perhaps most interestingly, Schneiderman said that the coalition of liberal, progressive and labor organizations that had come together to insist that the current settlement not let the banks off the hook would help force the task force to ultimately succeed.

“This will ultimately depend on the coalition that’s assembled around these principles,” Schneiderman said. “We’ve now got a progressive coalition that … can move public officials to take a more aggressive approach.”

I do have some faith Scheiderman will succeed in doing some real investigation. But when I read this description of Obama’s commitment, I couldn’t help but think of Elizabeth Warren. Sure, she got a CFPB set up. But when it came time to using a recess appointment to put her in charge of it, well, that never happened.

Also, to trust Obama on this? He’s the same guy who promised accountability on illegal wiretapping and changes to FISA Amendments Act.

I still trust Schneiderman will get some investigation here, but I’ve learned from experience that Obama may renege on his promises to progressives for accountability.

How Dare the President Protect Consumers!?!?!

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We’ll have to come back to the issue of why President Obama decided to use his recess authority to appoint Richard Cordray to head the Consumer Financial Protection Board but not Dawn Johnsen or Elizabeth Warren. But for now, I’d like to collect the wails of Republican outrage.

Shorter John Boehner: Protecting consumers from rapacious banks is an extraordinary and entirely unprecedented power grab! Protecting consumers is bad for the economy!

Shorter Mitch McConnell: Obama has arrogantly circumvented the American people by protecting the American people!

Shorter Orrin Hatch: It is a very grave decision by this heavy-handed, autocratic White House to appoint someone to protect consumers. The American people deserve to be treated with more respect than this White House is affording them by protecting them from the banks!

Shorter Spencer Bachus: Appointing a director to the CFPB will cripple it for years. The greatest threat to our economy right now is uncertainty, and by protecting consumers the President just guaranteed there will be even more uncertainty.

 

The Scandal Is that Jonathan Alter Doesn’t See the Scandal

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[Sorry for my unannounced absence. I’m on a road trip visiting Mr. EW’s family. Thanks to Jim White and bmaz for guarding the likker cabinet! I know they’ll keep it safe!]

I once got in trouble for mocking people who thought that blowjobs were a scandal worth legal investigation, but torture was not. Given that Jonathan Alter is the so-called liberal who, weeks after 9/11, affirmatively embraced torture, I’m not surprised he still falls in the former group. On Thursday, he wrote a Bloomberg piece sycophantically wondering how Obama managed to have such a scandal-free Administration. This, of the President whose Administration continues to invent all sorts of legal gimmicks to protect his predecessor’s torture. And this, of the guy who is looking high and low for new ways to bail out the banksters from the consequences of their crimes.

This Administration has smothered what was left of rule of law. And yet Alter can’t find a scandal?

Part of the problem stems from Alter’s terms. he equates scandal with some kind of honesty.

President Barack Obama goes into the 2012 with a weak economy that may doom his reelection. But he has one asset that hasn’t received much attention: He’s honest.

Obama certainly lies: about his commitment to the public option, his opposition to telecom immunity, and even his belief that no one is above the law. But what Obama does more is spin–spending months claiming that the deficit is the biggest threat to our country, claiming that a bank settlement is necessary to get the housing market back on track. That kind of spin requires real analysis to catch. Which, I guess, Alter isn’t up to.

And part of Alter’s problem is his adoption of Brendan Nyhan’s definition of scandal: the reference to something as a scandal by a WaPo reporter on that rag’s front page.

Nyhan says that political scientists generally see The Washington Post as a solid indicator of elite opinion — so for his study, a problem officially curdles into a scandal once the S-word is used in a reporter’s own voice in a story that runs on the front page of the Post.

Given that one of the WaPo editorial page’s most striking ideological commitments is to torture, it seems nearly impossible that torture–and the refusal to prosecute it–would ever be a scandal by Nyhan’s (and therefore Alter’s) terms. And Dana Milbank’s bankster epiphany notwithstanding, WaPo reporters are, almost by definition, isolated from the effects of the banksters’ crimes by class and distance.

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Elizabeth Warren: I’m Saving All the Rocks in My Pocket for the Republicans

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I just got off a conference call with Elizabeth Warren. And while she said her plans extend no further than taking her grandkids to LegoLand, it’s pretty clear she’s going to be spending her time beating up on Republicans. Rather than respond to questions about why she didn’t get the job as Director of CFPB, she said she was “saving all the rocks in my pocket for the Republicans.” She also said, in the context of fighting for the CFPB, that

Having a nominee frees us up to have a big political fight. … Republicans want to embrace the system that failed. My view is we can now have that fight. … Republicans are counting on the word [that they’re opposing the CFPB] not getting back to their constituents at home.

This is the kind of fight we haven’t heard from Warren for the entire year she’s been cooped up at the White House. And it’s the kind of fight that, when she is allowed to make it, she generally wins.

So whether or not Warren intends to run for the Senate (she demurred when asked that question), it seems she’s prepared to, finally, make this a political fight, to make Republicans pay for their intransigence on this issue.

In the end, this won’t necessarily get us a CFPB Director, and therefore it won’t necessarily gets us a fully-functional CFPB. But it will finally brand Republicans for the anti-consumer policies they’ve embraced.

Let’s hope the White House doesn’t undercut Warren’s arguments by embracing the same kinds of policies.

Why Push Elizabeth Warren to Join America’s Most Ineffective Body?

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The news reports in the lead-up to this weekend’s announcement that Obama was ending the career of yet another prescient female bank regulator, this time even before it started, prepped the progressive community to champion an Elizabeth Warren run for Ted Kennedy’s MA Senate seat.

And so the usual suspects are out in force arguing that Warren would be better off running for Senate than she would be shaming Republicans for trying to kill off the CFPB.

Whoever is nominated to lead the CFPB is going to spend the next year of his life being filibustered by Republicans. The very best he can hope for is a recess appointment, in which case his tenure in the position would be relatively swift. So the question isn’t who you want leading the CFPB for the foreseeable future. It’s who you want spending his or her time being stopped from leading the CFPB for the foreseeable future. And it’s not clear that the answer to that question is “Elizabeth Warren.”

Warren, after all, has another option that she appears to be taking seriously: challenging Scott Brown in the 2012 election. For reasons I’ve outlined here and Bob Kuttner elaborates on here, there’s reason to think she would be a very effective candidate. But if she wants to do that, she can’t spend the next year being blocked from leading the Consumer Financial Protection Bureau. She has to spend at least part of it preparing for her candidacy.

Now, I don’t think there’s any doubt that Warren would prefer to lead the agency she’s built than launch a Senate campaign that may or may not succeed. But launching a Senate campaign that may or may not succeed seems like a clearly more effective way to protect her agency and further her ideas than being blocked from leading the agency she’s built.

Not only does this view not even consider whether Warren–or a relatively unknown midwestern politician–would be more effective making the public case for the bureau.

But it also seems to confuse the value of running for Senate with actually serving in the Senate.

What the people hailing a possible Warren run are arguing, effectively, is that the consolation prize for the banks having beat her on CFPB should be junior membership in a body that–as Dick Durbin has told us–the banks own.

Even putting aside the power of the banking lobby in the Senate, under what model would Senator Warren be effective championing progressive values, or even just “protect[ing] the agency she’s built”? Even assuming the Democrats kept the same number of seats they currently have on the Senate Banking Committee, even assuming Democratic leadership has already promised her the seat that Herb Kohl’s retirement will open up, that will still make her one of just three progressives (the other two being Jeff Merkley and Sherrod Brown) on a committee that has long been actively working against her CFPB candidacy. Even assuming Democrats keep the Senate, how amenable is Chairman Tim Johnson–a bank-owned hack–going to be to Warren’s ideas? If Richard Shelby were Chair, it’d be even worse.

And what about Warren’s effectiveness in the Senate as a whole–that body, under Democratic leadership, where good ideas go to die? Name a progressive Senator who has been able to do much to champion progressive ideas there? Sanders? Franken? Whitehouse? Sherrod Brown? I love all those guys, and like Sanders and especially Franken, Warren would presumably be able to leverage her public support to push some ideas through. But are any of them more effective at championing progressive values than Warren was before her White House gig, when she regularly appeared on the media and excoriated the banks in terms that made sense to real people? Just as an example, Byron Dorgan used to be effective before his progressive, deficit-cutting ideas were killed by the leader of his party. Similarly, Ted Kaufman turned out to be a surprisingly effective check on the banks, but that was partly because he came in knowing he’d never run for election (and he also knew, coming in, the tricks a lifetime of service as a Senate aide teaches).

Don’t get me wrong. I understand why the Democratic Party would like to have Warren in the Senate. I even understand how Warren might consider a Senate seat to be similar to her earlier public position, with the added benefit of having one vote to push progressive issues. I don’t dismiss the likelihood that Elizabeth Warren might be able to prevent a sixth corporatist judge from getting a lifetime seat on the Supreme Court.

I don’t think a Senator Elizabeth Warren would be a bad thing–I just think folks are far overselling what good it would bring.

It really seems the push for a Warren Senate candidacy ignores what a Booby Prize membership in the Senate has become of late.

Darrell Issa Steps in It, Inadvertantly Reveals Improper Use of Congressional Funds to Serve AEI

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United States House of Representatives Seal

United States House of Representatives Seal by DonkeyHotey

Republicans are big fans of projection. When they’re neck-deep in conflicts of interest, they like to hide it by accusing Democrats of such conflicts. When they leak stuff, they accuse Democrats. When they mismanage stuff, they accuse Democrats.

And yesterday, Darrell Issa got caught doing just that.

A year ago, on July 27, 2010, Issa accused the Financial Crisis Inquiry Commission of partisanship, largely because Democrats passed the Dodd-Frank financial reform bill before the FCIC reported its conclusions. Of particular note, Issa claimed Democrats on the FCIC were letting partisan ties direct their work.

Yet, as a report released by Elijah Cummings yesterday makes clear, the Republicans were the ones being directed by outside influences–both by their own partisan considerations, as well as two possible lobbyists. The report found that:

  • Immediately after Republicans took the House last November, some Republicans on the Committee started tailoring their contributions to make sure they would serve the goal of setting up a repeal of Dodd-Frank. Of particular note, Commissioner Peter Wallison started sending emails warning, “It’s very important, I think, that what we say in our separate statements not undermine the ability of the new House GOP to modify or repeal Dodd-Frank.”
  • Wallison (who is a fellow of AEI) also tailored his contributions–including his separate statement–largely to parrot the discredited theories of AEI fellow (and former Fannie Mae official) Edward Pinto. Pinto argued that the entire crash was caused by HUD’s affordable housing policy. Wallison’s mindless insistence on advancing Pinto’s theory got so bad that the special assistant to Republican FCIC Vice Chairman, Bill Thomas, suggested, “I can’t tell re: who is the leader and who is the follower. If Peter is really a parrot for Pinto, he’s putting a lot of faith in the guy.” Not only did Wallison serve Parrot’s propaganda, though: he also shared confidential documents made available to the FCIC, violating its ethics standards.
  • Thomas himself consulted with–and shared confidential information with–someone outside the Commission: the CEO of a political consulting firm, Alex Brill (he’s also a fellow at AEI). At one level, Brill seems to have been offering Thomas political advice. But it also appears Brill may have been trying to cushion the damage done by the FCIC to Citibank’s reputation.

Now, Cummings released this report partly because Issa refused to call Thomas and Wallison as witnesses in his inquiry into problems with the FCIC. And the release of the report seems to have convinced Issa to indefinitely postpone the investigation into the FCIC.

Good–this is precisely the kind of thing I was thinking of when I suggested we needed someone like Cummings to babysit Issa.

But it also seems like a good time to turn this into a much bigger attack.

As Cummings’ FCIC report makes clear, what Wallison and Thomas appear to have done is unethically misuse funds appropriated by Congress. While it’s not entirely clear who the ultimate beneficiaries of their ethical lapses are–aside from, vaguely, the banksters, both men were collaborating improperly with AEI fellows. More clearly, both men appear to have violated their ethical obligations–a set of rules–to try to make sure banksters didn’t have to follow any rules passed under Dodd-Frank.

Issa is teeing off today, again, against Elizabeth Warren. I do hope Cummings finds ample opportunity to remind Issa that it’s clear he’s doing the bidding not of transparency or oversight or the American people, but rather a number of corrupt banksters trying to avoid playing by the rules.