Monday, July 28, 2008

Blaming the Passengers

I’m starting to get more than just a little annoyed at the holier-than-thou crowd and Monday morning quarterbacks in the "news" media who are buying the industry-driven mantra that the problems in the debt markets and the economic fallout are because of mortgage lending to people who shouldn’t have gotten loans.

Trust me – it’s their PR machine at work, diligently trying to shape public opinion and point the finger at the consumers as opposed to the perpetrators. The stakes are high - as in trillions, so you can’t expect the folks who actually run Washington to shy away from getting the media to help them in pointing fingers at easy targets.

And it’s starting to work. Alleged “news” pieces are starting to appear in places other than chatrooms, forums and blogs, citing complaints from people about a bailout – as if the bailout was for the real victims. And lo and behold, “experts” are being drawn on to get the word out in the mainstream news.

But the reality is, any bailout is for the industry and the investors – NOT the borrowers. Most individual borrowers have one home to lose. The industry is facing trillions of dollars of rapidly vaporizing wealth they created for themselves and are reluctant to see stop coming their way.

Tossing ordinary people who have been taken advantage of under the bus is sickening. The industry’s well-crafted defense is taking hold in the media – people are supposedly to blame for taking out loans they didn’t qualify for and then not being able to pay for them.

But those who are hopping on the blame-game bandwagon won’t admit that the majority of people who were taken advantage of were led into adjustable rate mortgages for one reason and one reason only: There was yet another loan in the making; either the borrower would have to refi before the ratchet up or it would explode and be foreclosed on and yet another loan would be created for that property. To keep that machine churning required monumental fraud.

Spare me the “they’re just irresponsible” paintbrush. Yes, some borrowers are. But given who the squaliformes targeted and lured into the sausage machine it is nothing more than financial bigotry to simply say “they shouldn’t have signed that.” Guess what, in a lot of cases they didn’t even sign anything that was legally viable. But that didn’t stop servicers from turning the crank on the manufactured default/rapid foreclosure process, without which the machine would have clogged up and ground to a halt.

And worse, the majority of Americans who didn’t need to worry about fighting the credit scoring debacle sat back and enjoyed artificially low interest rates while the sub-prime victims (many of which should never have been there) drove profits into the stratosphere for the squaliformes and made millionaires among the legalized gamblers on Wall Street.

So give the whining about allegedly irresponsible subprime borrowers a rest - you’re blaming the passengers on the train for the sleeping engineer and the resulting crash.

The Honorable Judge Roy Bean

Friday, July 25, 2008

Jerry Brown is "Shocked!" Yea, Right.

Is it their political position and isolation from the real world that causes Attorney’s General to make sudden discoveries of old news? Or are we just supposed to assume they are running a few years behind the rest of us when it comes to the Squaliformes operating, or even based, in their state?

After filing suit against Countrywide in June, California’s Attorney General Jerry Brown put on a new song and dance about Bank of America’s newly-owned company just last week – he was “shocked.”

Shocked? Yes: "These shocking new details provide further evidence of Countrywide's dangerous lending practices,” Brown said. He was so “shocked” that he added twenty new charges to the suit.

But what he didn't mention was his sister's position on the CW board.


In 2001, while Mayor of Oakland, referring to the “Don’t Borrow Trouble” educational program Brown said: “Predatory lending is a reprehensible practice. This educational campaign will equip Oaklanders to make better financial decisions.”

Guess what, Jerry - that was PR fluff that you and a bunch of politicians got roped into.

Back in March of 2007, Gareth Lacy, Brown’s spokesman, said the attorney general has an “active and open investigation” that’s a continuation of probes into predatory lending practices that began a couple of years ago – as in 2005. And now, here we are in 2008 and Jerry Brown is “shocked.”

Yea, right. On this side of the Pecos, we'd wire up the ol' 'lectric fence and wrap this allegedly shocked nimrod in it to let 'im find out what a real jolt is.

The Honorable Judge Roy Bean

Tuesday, July 22, 2008

The Obama/Prtizker PR Machine Fires Back (with Blanks)

The PR machines and political supporters are busy, scrounging the net and blogs for anything that might be detrimental to a political candidate or a powerful Squaliforme.

Take the first published comment to the previous post. Then take the blog the author points to for what it's worth - they're firing blanks.

Let’s dissect this flimsy public-relations exercise:

Claim 1: Penny Pritzker had no ownership in Superior. She did not profit or receive compensation, except minimal directors' fees. She and her extended family lost a great deal of money from this investment.”

OK, let’s see just how that works – “[she] and her extended family lost a great deal of money from this investment,” yet Penny Pritzker allegedly had “no ownership in Superior"??? Unfortunately, the author of this fluff piece misses the dichotomy, especially when claim 2 is made:

She and her extended family agreed to pay the largest amount in the history of U.S. banking to the federal government: $460 million although they owned just 50% of the bank.”

You can’t have it both ways – the Pritzkers either did or didn’t own 50% of the bank and Penny is, after all, part of that “extended family” that “lost a great deal of money from this investment.” If we are supposed to be concerned that they, as half owner, paid while the other half didn't, that was their decision, which brings me to,

Claim 2: “They made the agreement because "it was the right thing to do."

Wrong again – they made the agreement so they would not have to spend years in court and expose themselves and the bank’s management to civil and potentially criminal liability. It wasn't quite the 'get out of jail free' card they expected; it would have been a nearly $40 Million dollar windfall if their and the FDIC's legal strategy against Ernst & Young had worked out the way they had planned.

Because of these payments, uninsured depositors are expected to receive 80% of their uninsured funds.”

And we are to conclude what from that? Eventually those uninsured depositors are expected to “only” lose 20% of their deposited funds.

And let’s take another look at claim 3: When Penny Pritzker was chairman of the Superior Bank board of directors, Superior received high ratings from the Office of Thrift Supervision.

Wow. That’s a relief. The people asleep at the switch were consistently asleep at the switch.

Her primary focus as chair was to ensure that poor performing commercial loans Superior inherited from its predecessor, Lyons Savings & Loan, were cleaned up."

My “so what” light is blinking, and if anyone believes a Chairman's focus was that narrow I have some ocean-front property over here on this side of the Pecos I'd like you make an offer on before you get to see it. And they didn't 'inherit' poor performing loans - they BOUGHT Lyons and those poor performing loans with their eyes wide open.

"When this was completed in 1994, she left the bank board but did continue as a member of the board of directors of the bank holding company.”

The "so what" light is still blinking. If anyone believes there isn't any control exercised by a holding company over the executives of the companies it owns, I have another one of those ocean-front properties available. Holding company ownership has protections AND privileges, including picking up the phone and holding people you know on a first-name basis accountable for things.

Superior Bank was required to comply with applicable federal and state fair lending laws and practices. This was the bank's policy."

Ah, yes, the PR mantra of the squaliforme - "we're so regulated we couldn't do anything wrong."

"In addition, the bank's operating philosophy insofar as directors were aware was to follow ethical business practices. Loans and loan policies were overseen by the bank's management, officers, and employees.

(Emphasis added 1): The magic "I didn't know" defense. I wonder which member of the legal team came up with that one!

(Emphasis added 2): In other words – "we’re not responsible for the people in the company we owned." What part of Board of Directors and holding company oversight responsibilities do you believe they should get a pass on?

Board members of the holding company, Coast to Coast, were responsible to shareholders; Superior board members and officers were responsible for the bank.”

Now my BS detector is on full. This is one of the stupidest ploys I've seen in corporate PR dances in a long time. Let's see, the holding company owners were responsible to whom? Uh, just themselves. Sure. That makes more sense. And the people they as owners put on the Superior board were responsible for the bank. The owners were more than happy to risk hundreds of millions of dollars and not bother to keep an eye on what was going on. They trusted the Superior board and the officers - they must have; they bailed them out and protected them from further investigation and prosecution via the settlement. Now comes the PR slam, that it was the Superior board members and the bank officers that were responsible. Not the owners.

Losses related to Superior subprime (whether through foreclosures or to bond investors through securitizations) were minimal compared with losses of other subprime lenders after 2001.”

Allow me to translate: "Someone else got caught and lost more than we did so we're not to blame. Besides, we didn't do anything wrong anyway, remember?"

Unlawful lending has been widely investigated; no regulatory body has alleged Superior violated fair lending practices.”

That's clever - 'no regulatory body has...' that we know of, of course because of the terms of the settlement which bar any such investigation. But at least one court has. Check out the New York Supreme Court summary judgment ruling in favor of a borrower, noting that LaSalle had engaged in predatory lending. (LaSalle Bank N.A. v. Shearon Case (No.100255/2007, 2008 WL 268449).

Unlawful lending was not widely investigated in the Superior meltdown. It was hardly being investigated at all at that time. It was widely complained of, particularly in inner-city and minority communities but not much was actually being done. It was simply one tip of one iceberg the regulators were refusing to do anything about as the subprime heyday was ramping up and the money flowed into Washington.

In 2004, Penny Pritzker was named as a director of LaSalle Bank Corporation and federal regulators did not object to her serving on the board of a national bank.”

Wow. Penny got on board with another major Squaliforme (not long before it was purchased by BofA) and the lap-dog regulators didn’t object. We should all be more impressed, eh?

Granted, the authors of the alleged 'facts' about Superior Bank blog are simply doing their job on behalf of the Obama campaign, but until the people who want to be elected to office rid themselves of the wealthy sub-prime squaliforme friends and supporters, they deserve nothing but scorn and even more exposure.

As the title of my previous post says, "....More Need to Go."

The Honorable Judge Roy Bean

Monday, July 21, 2008

One Down, More Need to Go

Well Squaliforme champion Phil Gramm's mouth finally did him in, which should improve McCain's chances of being elected this fall. In a typical 'let them eat cake' moment, the Godfather of predatory lending and bank deregulation spoke a partial truth - but it wasn't well crafted enough and revealed the mind-set that permeates the Washington lobby culture. Gramm will have to go back and suffer in his role at UBS.

Now the Obama campaign needs to step up to the plate and dump Penny Pritzker - legendary former owner of the sup-prime predatory lending squaliforme Superior Bank. Pritzker and Dworman (the owners) are still handing out multi-million dollar payments every year to the FDIC (part of the deal where no one had to admit any wrongdoing at Superior).

But the settlement was a pretty good gamble for the Pritzkers. The FDIC went after the auditors, Ernst & Young for compensatory damages in excess of $500 million and $1.5 billion in punitive damages. If the FDIC had gotten two billion dollars, Pritzker and Dworman would have been entitled to almost $500 million under their settlement agreement with the FDIC - without having to spend anything in chasing Ernst in court.

But their strategy fell apart when the courts decided the FDIC (as receiver) and Ernst were bound to settle their issue in arbitration. Instead of $500 Million, Pritzker and Dworman wound up getting only $30 Million back.

$460 Million sounds like a lot of money. But it was $100 Million there in 2001 and the rest of over 14 years, or roughly $25.7 Million per year - minus the $30 Million from Ernst. I won't bore you with the time-value-of-money view but you can bet they did.

But the FDIC paid out roughly $700 Million in the fiasco. And over a thousand depositors in the bank had amounts of more than the $100,000 threshold that weren't covered, so they're out of luck to the tune of $40 Million - their suit against the owners and managers was dismissed in 2004.

So if you feel sorry for the Pritzkers and Dwormans having to pay $25+ Million per year for a few years, imagine how quickly you'd be be behind bars if you ran a company that did what Superior Bank did.

Until regulators and prosecutors show some backbone in the all-too-cozy game of not having to admit wrongdoing, none of this kind of abuse is going to stop.

The Honorable Judge Roy Bean

Sunday, July 13, 2008

A Letter to Washington

Dear Congressman/Senator ________________:

I see in news reports that there is great consternation on the hill over the financial industry.

Sorry, but you’re more than a decade late. You had your chance. You’ve been told over and over again that the house of cards was just that. You were content to ignore and even take advantage of the situation.

The people you turned into multi-millionaires were more than happy to help keep you in office all these years while the rest of us have been taken advantage of. Ordinary people funded the whole sordid mess with usurious interest rates and shockingly egregious fees and charges that created jobs and incomes for millions of ancillary company employees. The mutation sucked billions of dollars from people who thought they were supposed to own a home and did little more than lure them into paying more in interest than any other part of their budget.

Others have now lost whatever equity they may have had.

Now when the perpetrators of this scheme are whining you want our tax dollars to bail out the crooks you helped put in business? The chutzpah is staggeringly blatant.

It isn’t and never really was about the “American dream of home ownership.” It was the largest debt-creation and wealth-transfer scheme in the history of the world, and it naturally attracted those who knew how to take even further advantage and used their influence to keep the game going.

Now your creation has been exposed for what it really is and everyone who has anything to do with it is going to be running for cover and pointing fingers. That is if they’re still in the country.

And when the smoke clears and everybody who was on the inside breathes a sigh of relief that the Justice Department decided yet again to look the other way for 99.999% of the perpetrators, the lobbyists will take their checks and their marching orders and will go forth. The game will begin yet again.

Unless we all wake up and toss your sorry asses into the dustbin of political history.

The Honorable Judge Roy Bean

Wednesday, July 09, 2008

The way it is...

If you want to see the true nature of the Squaliformes, here’s another smoking gun:

From SEC investigations into the rating agencies, an email has surfaced that pretty much sums up the whole sordid sub-prime origination, securitization, rating and servicing mess - an email from an employee found in an agency's CDO group quoted his manager as saying that the rating agencies continue to create an "even bigger monster — the CDO market. Let's hope we are all wealthy and retired by the time this house of cards falters."

The Honorable Judge Roy Bean