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August 3, 2011

Criminal Bank Conduct, Not a Paperwork Problems

Another article today about a big bank trying to settle lots of lawsuits and investigations arising from their criminal and/or fraudulent conduct in connection with selling and/or packaging mortgages during the boom and their unconscionable foreclosures and so-called robo-signing during the bust.  Today’s article is focused on Bank of America and its subsidiary Countrywide Financial, which it bought in 2008, but it could be about any number of big banks.

The settlement discussions are the same: eliminate all liability for the bank and, most importantly, all bank officers and employees in exchange for a loan forgiveness or modification program.  Think about this:  the bank engaged in a years-long pattern and practice of what can only be described as fraudulent if not criminal conduct that would put anyone else in prison for years if not decades, yet gets to buy off the cops with some money to help the victims they created.  

Worst of all, there is no requirement in any of these talks that I’m aware of that require the bank to come clean, publicly release all the relevant documents and provide sufficient information on its conduct so that anyone can evaluate whether the sell-out, I mean, pay-off, oops, I mean, “settlement” is any where near adequate.

Troublingly, there’s the risk of a tacit conspiracy here.  The banks want to “put this behind them” (gee, who wouldn’t) and escape from real liability (criminal and civil) and the prosecutors (many of them elected) want to claim victory, claim the settlement was the largest, one of the largest or the greatest settlement in history that will help millions or billions or trillions of people who need help – you get the point: no hyperbole will be spared.  Prosecutors also have the problem of competition from fellow prosecutors, typically in other states, who may or may not just be seeking the first headlines and political boost from a give-away, I mean, settlement.  Some prosecutors may also be sympathetic to the banks and want to settle fast for small money, getting the headlines while getting their buddies off the hook.  

As if all that wasn’t bad enough, the most egregious aspect of all this may be the reporting:  stories repeatedly use innocuous words that obscure what really happened here.  For example, so-called “robo signing” is massive, systematic, fraudulent, criminal conduct.  This is where banks themselves or their contractors sign legal documents to file in court swearing under oath that the facts are true and therefore support the legal application to take someone’s home away from them, i.e., foreclose.  

Can you think of anything more despicable?  Lying under oath to get someone thrown out of their home and onto the street.  That’s what robo-signing means and what it obscures every time that word is used.  Then, there’s always someone saying, basically, no harm, no foul because it’s just a paper work problem and these people are all delinquent and “deserve” to be thrown out on the street.  Really? Since when does saying “trust us” while we lie to you under oath make illegal conduct acceptable? 

And, the fraudulent if not criminal conduct occurred throughout the boom as well as the bust (when the robo-signing and other criminal conduct occurred).  For example, there are unending examples of mortgage brokers changing income, job history and other material terms in mortgage applications without the person having any knowledge of it.  Another example is putting large amounts of unqualified mortgages into packages that were securitized in violation of the required representations and warranties.

Anywhere else this would be called lying, cheating and stealing and its past time it gets called by the right name.  And, everyone should insist NO SETTLEMENTS by anyone (including, importantly, the SEC) that includes the elimination of liability for a corporation or any of its officers or employees unless it also includes a requirement that all documents related to the conduct are all publicly disclosed on a website.

If they are all getting total legal immunity, which is what they are demanding, then the American people deserve to at least know what they did and what they are getting immunity for.  The corporation and its employees and officers should have no objection because they will have no legal liability.  That simply must be a price for forgiving what has been years of unforgivable fraudulent and almost certainly criminal conduct that has victimized millions of American families, hollowed out neighborhood after neighborhood, and stuck millions more homeowners with underwater mortgages through no fault of their own.  



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