Alternet recently published some really valuable research on how the big banks are out of control criminals. The details of the way they get their profits out of all of our pockets is explained below. Brief excerpts of each his seven points is below…
1) …banks were faced with literally millions of foreclosures to process. But, being Wall Street outfits, they didn’t want to be responsible for doing any actual work themselves. Best to outsource the work to someone … cheap. And that is what they did – and are still doing. The banks hired “robosigning” outfits to process the foreclosures, which resulted in accusations of documentation fraud, where the outfits file affidavits claiming to have documents they do not have. The original mortgages often did not include proper paperwork to clearly prove who signed the loans or who had title, etc. These firms would forge signatures, sign affidavits saying they had proper paperwork when they did not, and a number of other ruses to speed foreclosures. And courts set up what were called “rocket dockets” to assist the process.
2) Predatory lending occurs when a lender uses unfair, deceptive, or fraudulent practices when selling a loan to a consumer. Borrowers are steered toward unaffordable loans, or charged higher fees or interest rates than those they qualify for.
3) The initial wave of mortgages to go bad were the “subprime” mortgages that were given to people barely able or even unable to make their payments. Why were there so many of these mortgages in the system? These mortgages were pushed on people by “predatory lenders” who would make a quick buck on upfront fees and commissions and then sell the loans to Wall Street to be repackaged into “CDOs” – the “toxic assets” that took down much of the financial system.
4) Betting Against Designed-to-Fail Bonds: Citibank made a lot of money from these bets because they knew where the toxic assets were, because they put them there, on purpose, in order to bet against them. CitiBank created these CDO toxic assets in a way that was designed to fail, and sold them to customers as solid investments, and then made bets that these assets were worthless. When the designed-to-fail assets failed, CitiBank made money, the customers were wiped out. The Securities and Exchange Comission (SEC) offered to “settle” this case with CitiBank, accepting a cash fine in exchange for dropping any prosecution or even making CitiBank admit wrongdoing. But promsingly this was rejected by the judge. DailyKos: Judge Rakoff stands up to SEC and Citigroup,
5) The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. “Our jaws are literally dropping as we’re reading this,” says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. “Every one of these transactions is outrageous.”
6) For years regulators were warned about “an epidemic” of mortgage fraud, but looked the other way. For example, a CNN news story is from 2004, years before the financial collapse, FBI warns of mortgage fraud ‘epidemic’, warned, “Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an “epidemic” of financial crimes which, if not curtailed, could become “the next S&L crisis.”
7) The Bailout Pecking Order: …they got to keep the money. For example, when you hear that Wall Street firm “Lehman Brothers” went bankrupt, you might think, “serves them right.” But what actually happened was that a lot of regular people ended up losing their jobs while a few people at the top got really, really rich. CEO Richard Fuld, for example, ended up with almost half a billion. (Really, really rich.)
Bonus mention from this great article: After the “S&L Crisis” there were 1,100 prosecutions and more than 800 bank officials went to jail. This time – even with the appearance of widespread criminality in the financial industry – not so much. In fact, not any. …our government again and again offers “settlements” that block the comprehensive investigations that come with prosecutions.