Mortgage Frauds, Official Shenanigans

Just how did the biggest bank fraud in the nation’s history go on with the full knowledge of authorities for 7 years?

Apparently, without much trouble.

Earlier this week, a judge sentenced Brian Farkas to 30 years in prison. He was the head of one of the country’s largest non-depository mortgage companies, convicted of a multibillion-dollar fraud that has been labeled the largest in the country’s history. The case was brought to prosecutors by the bailout’s former special inspector general – after a bank associated with the mortgage company tried to rip off the Troubled Asset Relief Program for $550 million.

Prosecutors said they sought the tough sentence as a deterrent, though bankers might not get the message.

Writing in the New York Times, white-collar criminal law expert Peter Henning said more respectable executives at bigger companies “perceive themselves as different from – and often better than – those who have been caught and punished, even if they are not.”

But one of the most outrageous aspects of the case has nothing to do with Farkas’ behavior: It has to do with how a government-sponsored  agency, Fannie Mae, found evidence of his wrongdoing  in 2000 and didn’t report it. According to court testimony as reported by Bloomberg News and the New York Times, when Fannie Mae found out that the bank was selling loans that had no value, the agency merely cut its ties with the bank.

Another government-sponsored agency picked up the business a week later, Bloomberg reported.

William Black, a former bank regulator who has been a sharp critic of the current administration’s lack of aggressiveness in investigating fraud in the wake of the 2008 financial collapse, told Bloomberg: “If there had been a criminal referral, Farkas would have gone to jail in 2002.”

Farkas’ firm, Taylor Bean remained in business for another 7 years before it collapsed in August 2009.

The confidential agreement to disentangle Freddie Mac from Taylor Bean was overseen by Freddie Mac’s general counsel, Thomas Donilon, who now serves as national security adviser to President Obama.

It’s not the first time Donilon’s actions have been called into question: while he was a lawyer in private practice, he led lobbying efforts to undermine the credibility of an investigation into Fannie Mae’s shaky finances in 2004.

It’s worth cheering that prosecutors finally successfully prosecuted a major case stemming from mortgage crowd. But it’s also worth noting that the perp does not come from the ranks of the nation’s too big to fail banks.

It’s also worth noting that Donilon’s conduct in the financial collapse didn’t get him cast out as a pariah, it won him one of the most important jobs in this administration.

 

 

 

 

 

 

 


Around the Web / Financial Crisis / Martin Column / President Barack Obama - 07/01/2011

Bringing it All Back Home

Looking at the photo of President Obama and his advisers tracking the mission to kill Osama bin Laden, I was struck by the president’s extraordinary intensity.

In the photograph I read not only his passion for the mission and his concern for the Navy SEALS, but his knowledge that his own job could be at stake.

Looking at Obama so present in the photograph, I couldn’t help but think about how absent he’s been from the economic crisis that’s afflicting millions of people here at home. Yes, he’s been worried about Bin Laden; yes, he’s obsessing about the deficit; and yes, he’s got to raise a billion dollars to fund his reelection. But we are still facing an economic crisis that has left housing behind, with the worst unemployment in decades.

So where’s the situation room for the unemployed and those losing their homes? Where are the presidential commissions and crack teams focused on tracking down new ways to salvage communities ravaged by foreclosure and joblessness?

I had the opportunity to hear President Obama at a rally a couple of weeks ago. He talked about how he stays up late reading letters from the unemployed. But the president’s rhetoric rang hollow and slick in the face of his lack of aggression in fighting for benefits for the long-term unemployed. He abandoned them at the same time that he extended the Bush era tax cuts for the wealthiest.

They’re the Obama era tax cuts now.

We’re in a bitter fight for real economic recovery here at home, to keep the most vulnerable from further suffering, to narrow the widening gap between rich and poor, to keep the country from losing its soul. It’s a complex mission, in uncertain terrain, against implacable foes.

The mission in Abbottabad required guts, rigorous planning, determination and flawless execution to accomplish what was deemed just and right. Now we need our president and all of his intensity fighting for us here at home.

 

 

Martin Column / President Barack Obama - 05/12/2011

Around the Web: Bigger Than Wikileaks

While the Wikileaks dump of secret diplomatic got more publicity, the Federal Reserve’s reluctance release of data on details of what it was up to in the bailout is actually the bigger story.

It’s a giant step towards the direction of democracy in a financial system that hasn’t had any.

What are we finding out? For one thing, just how much dishonesty is built into our knowledge of the financial system. Because corporate leaders never expected the data to be released, they lied, mischaracterized or downplayed their reliance on the Fed’s largesse.

Aaron Elstein lays it out at CrainsBusinessNewYork.com in a blog post headlined `Whoppers from the Bailout Binge’, (ht the Audit, which provides an excellent roundup of Fed dump coverage).

“In some cases,” Elstein writes, “the actions taken by companies jarringly contrast with their executives’ public comments about the bailout program.”

Along with the stunning secrecy that has surrounded the process and the dishonesty of the corporate recipients of the taxpayers’ generosity, a couple of other main themes emerged from scrutiny of the Fed data.

First, not only did U.S. taxpayers come to the aid of large European banks, they also gave emergency loans to many of the biggest U.S. businesses, like GE, Verizon and even Harley-Davidson. All of these institutions were deemed too big to fail, or even suffer more than a some sleepless nights’ worth of economic distress in the financial meltdown. About the only entities not deemed worthy of saving in the meltdown were many of the taxpayers themselves ­ who foot the bill for the whole extravaganza. The institutions that dreamed up the toxic loans got a bailout the taxpayers should have read the fine print more carefully, dammit!

Second, the Fed’s $3.3 trillion rescue scheme was rife with conflicts of interests. Members of regional Fed boards sat in on decisions to help out their own institutions, and corporations like BlackRock acted as paid advisers to the process and also bought securities on behalf of clients as part of the Fed’s efforts.

To put what’s happening in perspective, Matt Stoller, former senior policy adviser to former Rep Alan Grayson, the fiery Florida Democrat who recently lost his re-election bid, wrote this fine piece in Naked Capitalism.

Around the Web / Martin Column - 12/04/2010