We all know the story of the three little pigs and the big, bad wolf.
Little pig, little pig, let me come in.
No, no, not by the hair on my chinny chin chin.
Then I'll huff, and I'll puff, and I'll blow your house in.
To date that's been the story of the banks as the big bad wolf, blowing houses down all over America with fraudulent foreclosures, viewing home owners as tasty piglet snacks of profit.
Will we ever see role reversal in this never ending grim tale? Will the big bad wolf finally be our government, blowing down the Banks' house of mortgage and foreclosure fraud? Can the government at least hand Americans just a few bricks at least? It's yet to be seen.
The latest seems to be dueling events. One the one hand, there is a foreclosure fraud settlement in the works for all 50 States, which supposedly gives banks immunity and waves all future legal actions. Yet at the same time, the New York Attorney General filed a civil fraud lawsuit against three major banks over MERS.
New York filed a lawsuit against various units of JP Morgan, Bank of America, Wells, MERSCORP and MERS over their use of MERS in foreclosures. This civil suit alleges that the use of MERS has “resulted in a wide range of deceptive and illegal practices,” most importantly, over 13,000 foreclosures in MERS name where MERS “often” lacked standing to foreclose. The suit claims that an undetermined number of foreclosures that were not made in the name of MERS were also deceptive by virtue of MERS “certifying officers” making improper assignments prior to the foreclosure. The suit includes the use of robosigners who failed to review the review the underlying records as required, and served to disguise gaps in the chain of title.
These banks literally made $2 billion dollars by utilizing fraudulent foreclosure methods. On top of things, the NY Attorney General, Eric Schneiderman, is a co-chair of Obama's newly announced financial fraud unit.
Lenders including Bank of America Corp. and JPMorgan Chase & Co. and state attorneys general agreed to ensure that states signing a nationwide accord on foreclosures will be entitled to improved terms won later by states that opt out, two people familiar with the matter said.
That sure doesn't sound like a good deal for harmed former homeowners. The state who dares to go solo, pursing a civil lawsuit against the deep pocket banks, will assuredly have a long protracted and expensive legal battle. Only after that civil case win by a state who did not sign the settlement can other States then proceed to obtain justice for financial institutions wrong doing. What was that phrase about justice delayed is justice denied?
We might even have a pack of wolves now, huffing and puffing down the home owner's door. Naked Capitalist is reporting both the New York Attorney general lawsuit and the 50 state settlement are stealth bank bail outs.
Let me stress: this is a huge bailout for the banks. The settlement amounts to a transfer from retirement accounts (pension funds, 401 (k)s) and insurers to the banks. And without this subsidy, the biggest banks would be in serious trouble.
In the midst of all this, out comes a New York Times analysis shows the SEC gave a free pass to big banks 350 times.
Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases.
By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong.
Other civil suits are proceeding. The case against Goldman Sachs was just granted class action status:
A suit against Goldman Sachs Group Inc. (GS) may go forward as a class action on behalf of all investors in a $698 million mortgage-backed securities offering, a federal judge in Manhattan ruled.
The above legal battle deals are happening while history reveals itself. Fannie Mae and Freddie Mac were repeatedly warned about the mortgage and foreclosure fraud but did absolutely nothing.
Five years earlier, Fannie seemed to have taken a different view. That was when Mr. Lavalle pointed out legal lapses by some of its representatives. Among them was the law offices of David J. Stern, in Plantation, Fla., which was handling an astonishing 75,000 foreclosure cases a year — more than 200 a day. In 2005, Mr. Lavalle warned Fannie Mae that some judges had ruled that the Stern firm was submitting “sham pleadings.” Nonetheless, Fannie continued to do business with the firm until it closed its doors last year, after evidence emerged of rampant forgeries and fraudulent filings.
O.C.J. Case No. 5595 found that Stern wasn’t the only firm working for Fannie that seemed to be cutting corners. It also found that lawyers operating in seven other states — Connecticut, Georgia, New York, Illinois, Louisiana, Kentucky and Ohio — had made false filings in connection with work for Fannie Mae or the Mortgage Electronic Registration System, or MERS, a private mortgage registry Fannie helped establish in 1995.
Lest we forget, the long shadow of Attorney General Eric Holder casts an empty net. The Obama administration and his attorney general haven't prosecuted pretty much anyone over the entire financial crisis, derivatives, mortgage and foreclosure fraud.