Generated from a Newsmax post:
Think Motown is the only major U.S. city in a boatload of financial trouble? Think again. By Stephen Moore
“Detroit’s bankruptcy filing sent shivers down the spine of municipal bondholders, government employees, and big-city urban residents all over the country. That’s because many of the 61 largest U.S. cities are plagued with the same kinds of retirement legacy costs that sent Detroit into Chapter 9 bankruptcy this summer. Continue reading
InvestmentWatch reported on the recent predictions of Peter Schiff. Economic Crisis: 2007 and 2013 – Peter Schiff: A Collapse Happened In 2008, But Even More Catastrophic Economic Collapse Will Hit the United States Economy In 2013 or 2014
“In 2006, when he faced off with many well known Titans of investing and warned of an impending financial disaster and economic collapse, Peter Schiff was laughed at by his colleagues.
He urged Americans to exit financial markets and take steps to protect themselves before the wealth held in their savings accounts, retirement investments and real estate was wiped out. Few listened…
Municipal workers could be robbed of pension funds to pay big banks for payments due on interest rate swaps.
The Detroit bankruptcy is looking suspiciously like the bail-in template originated by the G20’s Financial Stability Board in 2011, which exploded on the scene in Cyprus in 2013 and is now becoming the model globally. In Cyprus, the depositors were “bailed in” (stripped of a major portion of their deposits) to re-capitalize the banks. In Detroit, it is the municipal workers who are being bailed in, stripped of a major portion of their pensions to save the banks.
Bear Stearns mortgage executives have plum jobs on Wall Street…Posted on The Center for Public Integrity by Lauren Kyger and Alison Fitzgerald
Before Lehman crashed, there was “The Bear.”
Bear Stearns, once the nation’s fifth-largest investment bank, had been a fixture on Wall Street since 1923 and had survived the crash of 1929 without laying off any employees.
But in 2008, its customers and creditors didn’t much care about its storied history. They were worried that the billions of dollars of mortgage-backed securities on its books weren’t worth what the company claimed. En masse, they stopped doing business with Bear. [DC Ed. note: see Confidence Game – The Film Unraveling Mortgage Fraud]
Within a few days, on Monday, March 17, Bear was gone — subsumed into JPMorgan Chase & Co. with the help of the Federal Reserve for a price that was approximately the value of its shiny new Madison Avenue office tower alone.
Bear Stearns failed largely because it had spent the previous five years gorging on subprime mortgages in what appeared to be an ever-rising housing market. When home prices started falling and those loans started to go bad, Bear’s creditors got scared and pulled their money out of the investment bank.
The demise of the 85-year-old firm was just a harbinger of what was to come. Six months later, Lehman Brothers collapsed under the weight of its own mortgage securities, sending first the financial system, and then the entire global economy, into a tailspin from which it hasn’t yet fully recovered.
Five years later, the executives that were in charge of Bear’s headlong dive into the cesspool of subprime mortgage lending hold similar jobs at the most powerful banks on Wall Street: JPMorgan, Goldman Sachs, Bank of America and Deutsche Bank.
The fact they were able to emerge unscathed from a financial crisis that wiped out $19.2 trillion of household wealth in the US and as many as 8.8 million jobs has become part of the legacy of the financial meltdown.
“The downside is very, very minimal for the people who decide to take risks in these institutions,” said Anat Admati, professor of finance and economics at Stanford Graduate School of Business and co-author of The Bankers’ New Clothes: What’s Wrong With Banking and What to Do About It.
“It’s clear that the ones at the top got the most in terms of compensation and suffered few consequences from these decisions,” she added.
Four of the executives, Thomas Marano, Jeffrey Verschleiser, Michael Nierenberg and Jeffrey Mayer, have been accused of making false statements in disclosures to federal regulators in a lawsuit brought by the Federal Housing Finance Agency, which oversees government-owned mortgage giants Fannie Mae and Freddie Mac. They are among dozens of people and companies named in the lawsuit. [Click here for Complaint]
All four denied all the allegations in a 179-page response to the lawsuit.
The four “deny that the offering documents referenced contained material misstatements of fact or omissions of material facts,” according to the answer jointly filed by the Bear Stearns companies and the individual defendants from Bear.
Two other mortgage division leaders, Mary Haggerty and Baron Silverstein, were not named defendants in the lawsuit.
AMBAC Assurance Corp., a company that guaranteed some of Bear’s mortgage bonds and went bankrupt in 2010, accused Bear of fraud in a separate lawsuit that described actions by the six mortgage division leaders. AMBAC emerged from bankruptcy in May.
Yet all six continue to work at the top levels of their field, earning salaries and bonuses that have allowed them to live in luxury while the mortgages that made up the bonds they sold have defaulted at alarming rates.
“How is it that we could say that we learned something from the last crisis when we still have the same people running our companies for the future?” asked Jordan Thomas, a former attorney for the Securities and Exchange Commission who now runs the whistleblower practice at Labaton Sucharow in New York.
Four years, $29 million
Thomas Marano, who led Bear’s mortgage finance division, is perhaps the most telling example.
In the past four years he earned more than $29 million as head of Residential Capital, LLC, the mortgage subsidiary of the former General Motors Acceptance Corp. (GMAC), which was bailed out by the government during the financial crisis. ResCap filed for bankruptcy last year.
As global head of mortgages, asset-backed securities and commercial mortgage-backed securities at Bear Stearns, he oversaw the underwriting and securitization of subprime loans from Bear’s mortgage subsidiary EMC Mortgage Corp.
His division oversaw the mortgage operation from start to finish. EMC would make or purchase mortgage loans, then pool thousands of them into mortgage backed securities, register them with the SEC and then sell them to investors.
The FHFA, along with the State of New York, mortgage insurers, and other federal agencies and investors, said in lawsuits that Bear falsely assured investors and insurers in customer disclosures and SEC filings that the loans were subjected to rigorous underwriting standards.
The lawsuits said Marano’s unit was so hungry for new loans to securitize that they let the standards slide and knowingly included bad loans in mortgage pools.
Marano personally signed the SEC filings on at least $8.7 billion worth of residential mortgage-backed securities sold to Fannie Mae and Freddie Mac, according to documents included in the FHFA lawsuit.
“Defendants falsely represented that the underlying mortgage loans complied with certain underwriting guidelines and standards, including representations that significantly overstated the ability of the borrowers to repay their mortgage loans,” the lawsuit states.
Marano, the company and all the other defendants “deny there was an abandonment of reasonable due diligence procedures,” according to court documents.
“Individual defendants deny that the securitizations … contained material misstatements of fact or omissions of fact,” the defendants’ response to the FHFA complaint filed in court reads.
Marano also directed executives to withhold “every fee” from credit rating agencies that had lowered the ratings on the firm’s mortgages bonds, according to the AMBAC complaint.
In the majority of the securities signed by Marano, more than half the loans were delinquent, in default or foreclosed by July 2011, according to figures the FHFA included in its lawsuit.
Marano, who has a 4,700-square-foot home in New Jersey and a vacation home in Park City, Utah, declined to comment for this story. He sold the New Jersey house to Old Pike Associates LLC, a limited liability corporation, for $99 in 2002 and the LLC also owns the Utah house. Old Pike’s address is Marano’s home address and the company lists Marano as CEO.
Marano is managing member of another LLC, Old Pike Associates II, LLC, which was formed in March 2012. The company bought a $4.2 million dollar home in Tenafly, N.J., in December 2012, according to public records.
When Bear went under, “everybody and their brother descended on the place,” looking to hire the best talent, said Chad Dean, managing partner of Integrated Management Resources and a banking recruiter for 11 years.
“Nobody should be surprised that Bear Stearns people are still all over the Street in high-level positions at other firms,” Dean said. “It’s very competitive. There’s resumés flying all over the place.”
Sen. Carl Levin, D-Mich., who as chairman of the Permanent Subcommittee on Investigations led some of the most thorough inquiries into the causes of the financial crisis, echoed that.
“Just because Bear Stearns went out of business doesn’t mean everybody who worked for Bear Stearns was incompetent,” he said. He declined to discuss Marano and his colleagues specifically.Warren Spector, who was co-president of Bear Stearns until he was fired in August 2007, said Marano was seen in the industry as a “rock star.”
“He knew the business inside and out, and he could do every job, up and down the line,” Spector said. “He was one of the best managers Bear Stearns ever had.” Spector said he has no knowledge of the specific accusations against Marano in any lawsuits. [DC Ed. note: Where are they today – click here]
One month after Bear’s sale, Marano was scooped up by Cerberus Capital Management, the private equity firm that was a majority shareholder of GMAC. By July, Marano was CEO and chairman of GMAC’s mortgage servicer, ResCap.
ResCap was one of the largest originators of home loans and the fifth-largest servicer of residential mortgage loans in the U.S. before it went bankrupt in 2012. The company had long been making huge bets on subprime mortgages.
Marano was brought in to clean up the mess. It was a difficult task.
When Lehman Brothers went bankrupt in September 2008 and credit markets froze, GMAC was among the companies that needed taxpayer help to survive. The company received a $17.2 billion taxpayer bailout through the Troubled Asset Relief Program (TARP).
Today, GMAC, which renamed itself Ally Financial in 2010, is still 74 percent owned by U.S. taxpayers. It is not clear when it will be able to repay the $13.75 billion it still owes the Treasury.
Because of the TARP bailout, Ally Financial was able to direct $8.6 billion to ResCap during the years Marano was in charge, according to a report by Christy Romero, the special inspector general for the Troubled Asset Relief Program.
Marano’s compensation is known because he was one of the 25 highest paid people at Ally Financial. Under the law, seven companies that received money from the TARP were required to submit their executives’ compensation packages to the U.S. Treasury for approval and to disclose them in SEC filings. Special paymaster Patricia Geoghegan approved Marano’s 2012 $8 million compensation — $6.2 million in salary and $1.8 million in stock options — just weeks before ResCap filed for Chapter 11 bankruptcy on May 14, 2012.
“There’s absolutely something wrong with executive compensation that gives extraordinary rewards to executives while at the same time shareholders’ value is diminishing or destroyed,” said Amy Hillman, dean of the W.P. Carey School of Business at Arizona State University.
Most of ResCap’s bad loans were made before Marano took over the company. However, in 2010, when he had been at the helm almost two years, the firm was accused of improperly rushing through hundreds of thousands of home foreclosures without the proper paperwork.
One employee testified to signing up to 10,000 foreclosure documents a month without personally reviewing the details, making the documents illegitimate.
“Our company’s process for preparing foreclosure affidavits was flawed,” Marano testified at a House hearing in November 2010. “There were affidavits signed outside the immediate physical presence of a notary and without direct personal knowledge of the information in the affidavit. These flaws are entirely unacceptable to me.”
ResCap, Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup settled for $25 billion with the Justice Department over what became known as the “robo-signing” scandal.
In May Marano resigned as ResCap’s CEO but remained on its board. He told The Wall Street Journal that he was considering starting a hedge fund, a real-estate investment trust, or another mortgage originator and servicer.
Jeffrey Verschleiser
Marano was not the only Bear Stearns mortgage executive to land in a similar role in mortgage finance.
Jeffrey Verschleiser, who reported directly to Marano as head of asset-backed securities, was hired as managing director at Goldman Sachs in 2008 and then promoted to global head of mortgage trading in March 2012.
Andrew Williams, a Goldman Sachs spokesman, declined requests for comment. Verschleiser’s lawyer declined to comment for this story and denied a request to speak to Verschleiser.
According to documents filed in the AMBAC lawsuit, Verschleiser encouraged Bear to short the stock of mortgage bond guarantors — essentially betting the price would fall — because he knew they would likely incur losses because of bad loans included in the mortgage pools.
“In less than three weeks we made approximately $55 million on just these two trades,” the lawsuit quotes Verschleiser as saying in an email.
Verschleiser lives in a $10 million Fifth Avenue apartment in New York City in the same building as Barbara Walters. Former Los Angeles Dodgers owner Frank McCourt recently bought the top floor of the building, with a sprawling Central Park view, for $50 million.
Multiple media reports indicate Verschleiser spent upward of $1 million renting out the popular Hotel Jerome in Aspen, Colo., for the weekend of his daughter’s 2012 Bat Mitzvah.
Many thanks to The Center for Public Integrity for this post.
Related Stories:
Everything You Need to Know About Wall Street, in One Brief Tale
Now Main Street Knows how Bear’s Jeff Verschleiser made Millions off Cheating Others
ResCap CEO Thomas Marano resigns
E-mails Suggest Bear Stearns Cheated Clients Out of Billions
Lehman, Bear Stearns Execs Cashed In As Their Firms Failed: Study
Ready to move in? Aren’t you glad to know that in some small sense (cents) your mortgage payments (or default insurance) helped to pay for this high rise living?
UPDATE 2022: Former Bear Stearns CEO James Cayne dies at 87
The truth… Your honor, they think we can’t handle the truth…
http://youtu.be/UXoNE14U_zM
Whether or not you are represented by an attorney understanding the legal system is an asset. The more you learn, the less likely you are to be taken advantage of or scammed. Knowledge is power!
BofA Tries To Block Class-Action Lawsuit
Bank of America moved to block a potential class-action suit in federal district court yesterday, saying the plaintiffs had failed to produce evidence of widespread abuses.
The case before U.S. District Judge Rya Zobel in Boston involves claims by several homeowners who sought loan modifications from Bank of America under the federal Home Affordable Modification Program (HAMP), an initiative introduced by the Obama administration in 2009 to help distressed homeowners keep their homes.
Lawyers for the plaintiffs allege that Bank of America deliberately lied, stonewalled, and mislaid documents in order to prevent homeowners who were successfully completing trial modifications from qualifying for permanent mods, enabling the bank to foreclose instead.
– See more at: http://www.bankerandtradesman.com/news155977.html#sthash.yfhx0jFR.dpuf
Attorney Robert Aronowitz, 65, testified he was “absolutely shocked” by Hendrick’s revelations and that he had hired her as a special counsel to give advice on how to fix the issues she raised in several e-mails.
“I’d never seen anything like (the allegations Hendrick made) in my entire practicing career” that spans nearly 40 years, he testified. http://www.youtube.com/watch?v=SjbPi00k_ME
An attorney turned whistle-blower at Colorado’s second-largest foreclosure law firm has detailed to state investigators a pattern of abuses that stretch beyond the scope of their investigation into alleged overbilling practices.
Susan Hendrick testified at a hearing Thursday that she told the state attorney general’s office about bill-padding she witnessed while a lawyer at Aronowitz & Mecklenburg in Denver, conduct that investigators say needlessly cost homeowners facing foreclosure millions of dollars. She then laid out a number of other alleged abuses she says happened.
The abuses ranged from the padding of attorney hours to allegations that the law firm destroyed evidence that prosecutors were seeking in their investigation into billing practices by foreclosure law firms, according to testimony in Denver District Court.
The hearing before District Judge R. Michael Mullins was to determine whether Hendrick, an associate at Aronowitz since 2007, was a special counsel to the firm in its efforts to clean up the problems she exposed.
Attorney Robert Aronowitz, 65, testified he was “absolutely shocked” by…
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Citigroup Avoided Paying $11.5 Billion In Taxes Thanks To Tax Shelters
In 2008, Citigroup was an ailing financial giant on the verge of collapse, an event only averted, most economists agree, by a huge emergency infusion of taxpayer money.
Yet when it came time to share the spoils of its return to good fortune with the U.S. government, the bank was not so generous. Over the next four years, Citigroup aggressively moved to make use of shelters in order to shield its earnings from U.S. taxation, doubling the amount of money it held offshore, according to a new report by the U.S. Public Interest Research Group, a nonprofit that advocates for corporate tax reform.
Citigroup is hardly alone in shifting profits to places like the Cayman Islands as a way to lower a tax bill. According to the report, 82 of the top 100 largest publicly traded companies as measured…
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If state legislators were smart they would all pass laws that mortgages must be recorded in state and county recordation offices, rather than be lost to a national registry and tax. It would also be wise to mandate that endorsements must be dated and fabricated assignments be treated like a felony – it is the same as stealing.
This is not uncommon. Hawaii has had its share of the same intrusion. People are becoming housebound – afraid to leave for fear their home will disappear while they are gone to the grocery. Invest in large attack dogs, a video survellience system, a police and neighborhood patrol alarm system and if you have to – maybe booby trap the doors and windows. It’s better than keeping your money in the bank… Because YOU DO NOT HAVE TO BE IN FORECLOSURE to get raided. And how do you compensate a family for the loss of their family treasures? Maybe when the police realize that their pension funds have been lost because these banks pulled a Ponzi scheme and their fund managers gambled away their retirement… Maybe then America will get the protection it needs. This was the bank’s fault – not the people across the street! The bank probably doesn’t even own the house across the street.
Bank clears out home mistaken for a foreclosure
What happens when a bank cleans out the wrong property, mistaking a person’s home for a new foreclosure?
This is the scenario that a woman in McArthur, Ohio, found herself in when First National Bank in Wellston mistook her property for a foreclosure across the street, ABC reports.
The bank cleared out her belongings and then asked for receipts, so the bank could reimburse the homeowner.
ABC News has more on the story:
Katie Barnett, 36, a nurse, said her family had left for about two weeks last month and returned to find the locks on their home had changed and many of their belongings had been taken.
“We called the cops and they said they thought it was a squatter,” she said.
Two dressers and clothing for her five children were taken, as well as items from outside their home…
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After interviewing several hundred homeowners, it became apparent that if you had $15k in the bank – your downpayment or payoffs were no less than $14,500. The banks knew how much you had and they stripped the borrowers of all of their cash and equity. As long as your accounts are not private and the banks have no regulations, morals or scruples – they will be in your back door wanting everything you have. The safe in the mattress is safer than in a banking institution.
Guy Walks Into Citigroup Branch, Loses $40,000
If the senators are going to persuade Congress to bring back Glass-Steagall, they should show examples of real, sympathetic people. This brings me to the story of Philip L. Ramatlhware, an immigrant from Botswana who went to a Citigroup Inc. (C) branch in downtown Philadelphia one day five years ago to open a regular bank account.
He was 48 years old at the time and disabled, after being hurt in an accident as a passenger on a Greyhound bus. His English wasn’t good, he had no college education and his last job had been at a fast-food kiosk at the Philadelphia airport. In April 2008, he received $225,000 in a settlement for his injuries, part of which went to pay legal fees. He was holding the settlement check when he walked into the branch.
Immediately he was referred to a…
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Deadly Clear 