Category Archives: Postings
“Excerpt from Sunday August 26, 2018, the Los Angeles Times front-pager on Senator McCain’s passing. I agree about the honor part and understand his suffering unfairly at the hands of his own government being terrible. I had it much worse on that front. But we all know that nothing can compare…
…to being in war or worse, being a POW and being tortured. God Bless John McCain.”, Mike Perry, former Chairman and CEO, IndyMac Bank
“Perhaps his greatest notoriety, however, came as a member of the “Keating Five.”
In the late 1980s, Charles H. Keating Jr., the owner of Irvine-based Lincoln Savings & Loan, spread cash donations to five U.S. senators — including McCain — in hopes of thwarting a federal investigation into Lincoln’s questionable investments and lending practices.
After a lengthy court-like procedure, McCain was found guilty by the Senate Ethics Committee of showing “poor judgment” for twice meeting with regulators at Keating’s request.
Although there was no sanction, McCain called the experience worse than anything he suffered as a war prisoner.
“The Vietnamese,” he said, “didn’t question my honor.””
“With due respect to Martin Feldstein’s economic bona fides, it seems somewhat disingenuous to suggest the Federal Reserve should “Save Low Interest for a Rainy Day” (op-ed, July 27) as if this inefficient monetary-policy tool is an asset to be drawn upon at some future date, similar to a saver’s nest egg…
…According to St. Louis Federal Reserve data, the interest rate charged for overnight bank loans (fed funds) dropped from 5.25% to 0% in the 16 months from September 2007 until January 2009, and this zero-bound rate continued for six years until December 2015. By contrast, the fed funds rate in the six years from Jan. 1, 1979 until Jan. 1, 1985 averaged 11.90%, with a high of 19%. I can think of no area of economics where a tolerance range of 0% to 19% would constitute efficient policy.
Nobel Prize-winner Milton Friedman observed that “the Fed has given its heart not to controlling the quantity of money but controlling interest rates, something that it does not have the power to do. The result has been failure on both fronts: wide swings in both money and rates.” Friedman couldn’t have imagined, in his wildest dreams, a $4.5 trillion market intervention by the FOMC.”, Mike Smith, Sugar Land Texas, Letters to the Editor of The Wall Street Journal, August 14, 2018
“Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans. Today’s agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted.”, Alex Tse, acting U.S. Attorney for the Northern District of California…
… Wells Fargo Chief Executive Tim Sloan said in a statement that the bank was “pleased to put behind us these legacy issues regarding claims related to residential mortgage-backed securities activities that occurred more than a decade ago.”, Excerpts from “Wells Fargo to pay $2 billion to settle case”, Hannah Levitt, The Los Angeles Times, August 2, 2018
Key excerpts from August 1, 2018 Settlement Agreement between Wells Fargo and the United States Department of Justice (re. crisis era Alt-A and subprime mortgage originations and securitizations):
Paragraph I. To avoid the delay, uncertainty, inconvenience, and expense of protracted litigation of the above claims, and in consideration of the mutual promises and obligations of this Agreement, the Parties reach a full and final settlement pursuant to the terms and conditions below. This settlement agreement is neither an admission of any facts or liability or wrongdoing by Wells Fargo nor a concession by the United States that it claims are not well-founded. Wells Fargo disputes the contentions of the United States set forth in Paragraph H.
12. The Parties acknowledge that this agreement is made without any trial or adjudication or judicial finding of any issue of fact or law, and is not a final order of any court or governmental authority.
Mike Perry’s Comments:
You wouldn’t know it from the Los Angeles Times article below or from the other press accounts I have read, but this is a complete and total victory for Wells Fargo.
Wells Fargo was coerced by the government to pay a $2.09 billion civil monetary penalty. That’s a small amount for them and they already had more than reserved for it.
They got disparaged by an acting United States Attorney and had a bad press day, so what. Mr. Tse is a liberal Northern California Democrat and unlikely permanent US Attorney to the Trump Administration. And the bad press was really fake news. How so?
Paragraph I. of the settlement agreement (above) says: “No facts, liability, or wrongdoing was admitted to by Wells Fargo. And Wells Fargo disputes the contentions of the United States in Paragraph H.”
It can’t get any better than that in a settlement agreement with the government.
As further evidence, Wells Fargo’s publicly-traded stock is up some since the settlement was announced.
So why did the press accounts get this wrong?
Because In Paragraph H. of the settlement, the DOJ listed a bunch of negative, unverified allegations-hearsay regarding Wells Fargo’s mortgage lending and securitization practices. Yet one paragraph later, in Paragraph I. (above) Wells Fargo disputes everything in Paragraph H.!
This is exactly what I referred to in my July 11, 2018 blog posting #1300 when referring to the 2014 BoA-DOJ settlement agreement. There I said, “Why this legal hide-the-ball? So that the civil division of Obama’s DOJ could falsely spin to the American public that BofA admitted to unproven allegations…and perpetuate the false narrative of rampant pre-crisis mortgage fraud-defects.” I went on to say, “The Obama DOJ sued every major FHA mortgage lender and sought quick, misleading settlements, using the coercive power that the government holds over banks, as a result of federal deposit insurance. This had a two-fold purpose. It helped cement the false narrative about pre-crisis mortgage lending practices, and it helped recapitalize the insolvent FHA insurance fund.”
That’s the big stuff, but here’s some more.
Read that first sentence of Paragraph I. above…”To avoid the delay, uncertainty, inconvenience, and expense of protracted litigation…the Parties reach a full and final settlement.”
What a joke, right?
This agreement involves Alt-A and subprime mortgages and securitizations from 2005-2007, more than ten years ago! And if Wells Fargo and the United States can’t afford the costs and uncertainty of a trial, no one can.
The reason Wells Fargo settled is they won.
The reason the government settled is they couldn’t prove their case in court. They couldn’t even get Wells Fargo to admit to a single allegation they made. But they got to put their unproven-hearsay allegations in the agreement and falsely spin them to the American public.
In Section 4, Excluded Claims of the settlement, there is a long list (more than a page in just 12 pages) of other potential actions the government could still take related to Wells’ Alt-A and subprime origination and securitization practices. By way of example, employees and directors are not exempted by this settlement agreement for, ”b. Any criminal liability; c. Any liability of any individual;….g. Any administrative liability, including the suspension and debarment rights of any federal agency;”
I’m not a lawyer, but it has been over ten years. Hasn’t the statute of limitations expired? Why put this in the settlement at all?
The only reason I can think is more window-dressing for the DOJ, so they can falsely portray this settlement as tough and harsh.
If Wells Fargo really had deficient Alt-A and subprime mortgage origination and securitization practices, why didn’t this settlement agreement lay out remedial actions Wells Fargo needed to take and the government’s oversight of such?
Finally, let’s go back to acting US Attorney Tse’s quote at the beginning of this post.
He says, “Abuses in the mortgage-backed securities industry led to a financial crisis that devasted millions of Americans.”
Even if he had proved his allegations in Paragraph H. against Wells Fargo, and he factually did not, how can a lifelong government attorney and prosecutor, with no training in economics and finance, make such a claim? Isn’t this statement a lie and show his obvious bias?
Isn’t Mr. Tse’s second statement also false? “Today’s agreement holds Wells Fargo responsible….” How so?
By HANNAH LEVITT
Ten years after faulty mortgages upended the global financial system, Wells Fargo & Co. agreed to pay $2.09 billion to settle a U.S. investigation into its creation and sale of loans that contributed to the disaster.
The long-anticipated penalty, announced Wednesday, is in line with what some analysts had predicted and smaller than sanctions borne by some of the San Francisco bank’s competitors. But the case offers a new look behind the scenes at decisions made at one of the nation’s largest home lenders before the crisis — and the evidence that executives saw of mounting trouble.
Investors, including federally insured financial institutions, ended up suffering billions of dollars in losses on securities that contained home loans from Wells Fargo, the Justice Department said in a statement announcing the accord. The investigation focused on mortgages in which borrowers were allowed to state their incomes, without providing proof.
Starting in 2005, the bank set out to double production of two types of risky mortgages: one known as subprime, offered to borrowers with weak credit, and another called Alt-A, a product targeted at independent contractors and others who may not draw a steady paycheck.
As part of the push, Wells Fargo loosened requirements for so-called stated-income loans, which allow borrowers to say how much they made without verification. The bank later sampled and tested some mortgages and found borrowers had fudged income numbers. Despite those findings, it continued to report inaccurate income figures to investors who bought mortgage-backed securities that later went bad, according to the settlement agreement.
“Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans,” Alex Tse, acting U.S. attorney for the Northern District of California, said in a statement. “Today’s agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted.”
Wells Fargo Chief Executive Tim Sloan said in a statement that the bank was “pleased to put behind us these legacy issues regarding claims related to residential mortgage-backed securities activities that occurred more than a decade ago.”
Other big banks settled similar claims with the Justice Department years ago and paid much larger penalties. In 2014, Bank of America and Citigroup agreed to pay $16.7 billion and $7.3 billion, respectively, to settle allegations they misled investors about risky mortgage-backed securities. JPMorgan Chase agreed to a similar settlement in 2013 and paid $13 billion.
Those deals, like Wednesdays, dealt only with mortgage-backed securities. Big banks, including Wells Fargo, have also paid to settle allegations that they duped the federal government into improperly backing crisis-era loans through the popular FHA mortgage insurance program. Wells Fargo agreed to pay $1.2 billion in 2016; Bank of America and Chase reached smaller settlements in 2014.
Wells Fargo executives had been signaling the settlement’s approach. In January, Chief Financial Officer John Shrewsberry told Bloomberg his firm would probably hash out terms this year.
Although he declined to discuss the potential cost, the firm took a $3.3-billion litigation charge late in 2017, mainly for mortgage-related issues. Bloomberg Intelligence analyst Elliot Stein had estimated the settlement for mortgage-backed securities could cost more than $2 billion.
The settlement comes as Wells Fargo tries to correct a series of consumer abuses that have resulted in a raft of fines and sanctions, including a growth cap imposed on it by the Federal Reserve because of weak risk management and corporate oversight.
Over the last two years, the bank has admitted that it created millions of bank accounts without customers’ authorization, charged improper fees on mortgage borrowers and forced thousands of auto-loan customers to pay for insurance policies they did not need.
Those practices, and others, also have led to more than $1.1 billion in payments to the Consumer Financial Protection Bureau and other regulators, including a $185-million settlement over unauthorized accounts in 2016 that kicked off the bank’s troubles.
Wells Fargo shares rose 36 cents, or 0.6%, to $57.65 on Wednesday.
Times staff writer James Rufus Koren contributed to this report.
Mr. Angelides: “Our goal was to create a record (The Financial Crisis Inquiry Commission Final Report) and history that could not easily be rewritten by ideologues or by Wall Street and its flunkies.”
Mike Perry’s response: It’s comments like this that clearly reveal Mr. Angelides as a lifelong, liberal Democrat partisan, rather than an objective finder of fact and the truth. From the day of the report’s release in January 2011, Mr. Angelides has misled the American public by falsely portraying his Commission’s Final Report as a unified report of the federal government. The fact is the Commission’s Final Report is a report of Democrats-only, no Republican on the Commission signed on to it. The Wall Street Journal itself notes in this very article that it, “was greeted with a universal shrug, and that its impact was diluted by two dissents from Republicans.”
Objectively, Mr. Angelides did not achieve his goal. Yet he continues, ten years after the crisis, to falsely claim that he did.
Mr. Angelides: “It’s the immaculate corruption. Banks were engaged in wrongdoing, but somehow no bankers were involved.” (The Wall Street Journal notes in this article, “That his lasting disappointment is that while several banks faced substantial fines, no one was really held accountable.”)
Mike Perry’s response: The tens of billions in government fines paid by banks to the Obama Administration (mostly the civil division of The Department of Justice) were coerced. The Wall Street Journal itself has noted this fact numerous times over the years, most recently in a mid-July 2018 Editorial Board article about a federal judge ruling that California’s government illegally took hundreds of millions of crisis era mortgage settlement funds to help balance its own budget. I don’t think they would they would have done that, if they thought this money was really going to California victims of their mortgage lenders, do you?
If Mr. Angelides truly ran an objective, bipartisan Financial Crisis Inquiry Commission, why would he be so upset that individual bankers weren’t punished?
What proof does he have that the Obama Administration (his own party) investigators and prosecutors did not? Mr. Angelides (or Senator Sanders) never name specific bankers and their specific bad behavior or crimes, why? He’s not the enforcer anyways. Others like former U.S. Attorney Preet Bharara were and found no evidence of crimes.
As Chairman, Mr. Angelides was supposed to be the objective finder of facts and the truth. His own post-crisis words reveal he was not.
The truth is that as a lifelong liberal, former head of the California Democrat Party, Mr. Angelides believes more in collectivism than individual freedom, liberty, and free-market capitalism.
He’s a progressive who believes that “the ends justifies the means,” rather than in The Rule of Law.
His comments remind me of a lot of socialist-totalitarian government politicians and officials that Nobel Laureate F.A. Hayek describes in his famous tome, The Road to Serfdom. In the chapter entitled, “Why The Worst Get On Top” Hayek says, “…in the second negative principle of selection (of political leaders): he will be able to obtain the support of all the docile and gullible, who have no strong convictions of their own but are prepared to accept a ready-made system of values if it is drummed into their ears sufficiently loudly and frequently…” And Hayek goes on to say, “It seems to be almost a law of human nature that it is easier for people to agree on a negative program….on the hatred of an enemy, on the envy of those better off…..than on any positive task. The contrast between the “we” and the “they,” the common fight against those outside the group, seems to be an essential ingredient in any creed which will solidly knit together a group for common action.”
Mr. Angelides, I stand ready to debate you on the facts and truth about the financial crisis, as long as it is public and we get to ask the questions of each other, anytime, anywhere.
Please read my ten-year anniversary blog posting #1300 on July 11, 2018.
THE WORLD THE CRISIS CREATED
Phil Angelides Delved Into the Root of the Housing Crisis. Now He Builds Homes
Former head of the Financial Crisis Inquiry Commission still defends the report that ‘landed with a thud’
By Asjylyn Loder
A decade after the financial crisis, The Wall Street Journal has checked in on dozens of the bankers, government officials, chief executives, hedge-fund managers and others who left a mark on that period to find out what they are doing now. Today, we spotlight ex-Merrill Lynch CEO Stanley O’Neal and Phil Angelides, former head of the Financial Crisis Inquiry Commission.
Investigating the roots of the financial crisis in Washington’s political hothouse can make even an experienced politician nostalgic for a local zoning dispute.
As the former head of the Financial Crisis Inquiry Commission, Phil Angelides had the unenviable job of herding the politically divided commissioners through an inquisition of Wall Street’s banking titans in order to explain to millions of Americans what had just happened to their homes, jobs and retirement accounts.
These days, he’s focused on real-estate investing and getting Democrats elected to Congress.
His latest venture as a property developer is McKinley Village, a newly built neighborhood in east Sacramento, Calif., equipped with an art walk and a community center. Every house comes prewired for solar panels and electric-car-charging stations. Prices range from about $500,000 to $1 million. He has also been involved in a few sizable solar power plants.
“Unlike a lot of what you may do in politics, there’s something very gratifying about and tangible about building big solar projects. There’s something very tangible about building a new urban neighborhood in your hometown,” Mr. Angelides said in a February interview.
Mr. Angelides talking about the commission’s report on the causes of the financial crisis in January 2011. PHOTO: JACQUELYN MARTIN/ASSOCIATED PRESS
But after a decade, albeit interrupted, of coaxing McKinley Village from the ground, Mr. Angelides, now 65 years old, says he plans get more involved in politics. A lifelong Democrat, he says he is concerned about the deregulatory fervor of the Trump administration.
Before his stint as head of the FCIC, Mr. Angelides was best known for his two terms as California’s state treasurer, from 1999 to 2007. He pushed the California Public Employees’ Retirement System, the nation’s largest public pension, to use its heft to advocate for changes on corporate boards like caps on executive pay.
After unsuccessfully challenging Republican Gov. Arnold Schwarzenegger in 2006, Mr. Angelides quipped to the press, “I will by popular demand re-enter the private sector.”
He went back into real estate until he was tapped to lead the 10-member Financial Crisis Inquiry Commission. From the beginning, the commission’s inquiry was plagued by political infighting. The commission held 19 days of hearings and interviewed more than 700 people, including public questioning of former Federal Reserve Chairman Alan Greenspan and Lloyd Blankfein, chief executive of Goldman Sachs Group Inc.
But the final report, published in January 2011, was greeted with a near-universal shrug. Its impact was further diluted by two dissents from Republican commissioners. As one headline put it, the report “landed with a thud.” The Economist described it as “big, surprisingly readable and a disappointment.”
Mr. Angelides is still defensive about the report’s reception.
“Our goal was to create a record and a history for posterity that could not easily be rewritten by ideologues or by Wall Street and its flunkies,” he said in February.
His lasting disappointment is that while several banks faced substantial fines, no one was really held accountable.
“It’s the immaculate corruption,” he said. “Banks were engaged in wrongdoing, but somehow no bankers were involved.”
This July 11th marks ten years since IndyMac Bank was seized by the FDIC.
As the founding Chairman and CEO, I knew post-crisis views about our institution were not true. I also believed that the mainstream narrative, that greedy and reckless bankers-Wall Street caused the 2008 financial crisis, wasn’t true either.
We weren’t greedy or reckless. Pre-crisis, no one thought that of us.
We responsibly pursued nonconforming (primarily Alt-A) mortgage lending, a $2 trillion U.S. marketplace, as a hybrid thrift-mortgage banker. Only a small percentage of our lending was as risky as FHA-VA home loans and none was riskier.
In 2007 Moodys, the lone holdout, upgraded our unsecured, corporate debt rating to investment grade. That year, we also received our best Safety and Soundness exam from our thrift regulators, and later on, they and the FDIC recommended me and I was accepted to serve on The Federal Reserve System’s Thrift Institutions Advisory Council, where I met with Chairman Bernanke and others.
By the way, in 2015 I filed a FOIA request and an appeal with the OCC, the successor to IndyMac’s regulator, to obtain that 2007 Safety and Soundness exam and was denied. Why would the OCC want to keep this from public view, after all these years? I later found it in a court filing, unrelated to me, and made it public on my blog nottoobigtofail.org.
In 2008, in the midst of the financial crisis and well after the nonconforming mortgage securities market had collapsed, and we had suffered significant losses, I wrote to our shareholders and told them that if they chose not to re-elect me, I would forego all severance and resign. Instead, along with the rest of the board, I was re-elected with over 90% shareholder approval.
Shouldn’t these 2007-2008 actions by those who knew IndyMac best, call into question post-crisis views about us?
I wasn’t fully woke to how partisan the Obama Administration’s investigations and enforcement actions related to the financial crisis were until Peter J. Wallison, a Republican minority member of The Financial Crisis Inquiry Commission (FCIC) explained in his 2015 book how the CONCLUSIONS OF THE FINANCIAL CRISIS INQUIRY COMMISSION, were agreed only to by the Democrat Chairman and the other five Democrats.
The four Republicans on the committee did not agree to the Democrat-majority’s views.
I don’t recall reading about this important fact? The Democrat majority’s press release on January 27, 2011, never mentioned Republican dissent and deliberately mislead by referring to “The Commission” throughout and saying this report: “Is the first official government report on what caused the crisis.”
Mr. Wallison describes this partisanship, “The ferocity of the left in defending Fannie Mae, Freddie Mac, and the government’s housing policies before 2008 is sometimes shocking. They have no data, no policy arguments, just a virulent denial that anything other than the private financial sector could possibly be responsible for the financial crisis.”
How could a false narrative, about a major financial crisis, have carried the day ten years ago and be perpetuated even today?
I wasn’t that surprised that liberal politicians would mislead and even lie about the crisis. I also vaguely understood that private plaintiffs’ attorneys filed frivolous, securities fraud class action lawsuits all the time.
I was surprised and disappointed though to learn that lawyers, both inside and outside government, mislead and lie with impunity “within the four corners” of their lawsuits and other civil court filings. They are almost never held to account by the courts or anyone else. It’s called “litigation privilege” and even famed Harvard Law Professor Alan Dershowitz has complained saying, “Welcome to the Kafkaesque world of American justice.”
Just as disturbing, I learned from direct experience, that government officials (with me, it was SEC enforcement) and politicians can lie about and publicly defame individual Americans, and yet are protected from defamation claims by another legal standard called “sovereign immunity”.
I think it’s wrong that most of the mainstream press regurgitate these unproven, often knowingly false claims in civil lawsuits and statements by government officials and politicians. The claims are so voluminous and detailed that many readers have to be fooled into believing they are factual and the truth, when they are not. And the facts and truth often never emerge, because of settlements that prohibit it or mislead, or because of the often long timeframes involved in civil litigation matters.
Thanks to President Trump’s election, there’s further explanation. There are parallels between the Democrats’ phony Trump-Russia collusion allegations and “witch hunt”, DOJ special counsel investigation and the false Democrat narrative that greedy and reckless bankers-Wall Street were to blame and the government must hold them to account. The big difference is that President Trump has his office and Twitter, half the Country, and a Republican Congress defending him. Crisis era bankers like myself, had their attorneys and their families and friends. And our lawyers advised us not to say a peep in our defense, for years. I didn’t entirely follow this advice, but most did.
Some Democrats are socialists. They distrust business people and hate anyone who makes money. For them, the financial crisis had a silver lining. They didn’t care about facts or the truth. They were out for blood. They had their villain, and some, including socialist U.S. Senator Bernie Sanders, called for bankers to be jailed, despite a lack of evidence.
Preet Bharara, a Democrat and President Obama’s U.S. Attorney for the Southern District of New York from 2009 on, was forced to respond to these un-American calls to “jail the bankers”, mostly by key members of his own party. More than once and in frustration, he said something like, “There weren’t any criminal activities. We looked hard.”
Milton Friedman and Anna J. Schwartz, in their famous tome on monetary policy, written decades ago, blamed the Federal Reserve for causing The Great Depression. Fed Chairman Bernanke finally admitted some Fed responsibility in an informal talk, nearly a century later. Many economic and monetary experts, like Stanford’s John B. Taylor, believe the Fed’s monetary policies were also the primary cause of The Great Recession.
In hindsight, I believe there was an “alignment-of-interests” among important and diverse groups within our government and in the private sector to scapegoat bankers-Wall Street.
Economists and other financial crisis experts like Mr. Taylor, Mr. Wallison, former IMF Chief Economist Mr. Raghuram G. Rajan, and co-authors Steven D. Gjerstad and Nobel Laureate in Economics Vernon L. Smith, have all written books about the root-causes of the 2008 financial crisis, but their books and findings have largely been ignored by the liberal press. Why?
Because those scholars mostly blamed the government: The Fed, government housing programs, well-intended laws to help the poor buy homes, 1997’s bipartisan Taxpayer Relief Act that exempted home resales from up to $500,000 in capital gains, and the national statistical rating agencies. They also blamed our country’s perpetual trade deficits and related large inflows of foreign capital. They largely didn’t blame the bankers-Wall Street and that didn’t fit the false narrative that liberal politicians and their friends in the press wanted to perpetuate.
Important financial players, including institutional investors, pension fund managers, short sellers, and even distressed buyers of failed banks like IndyMac, also had incentive to scapegoat bankers-Wall Street.
Investors and pension fund managers would rather claim that their crisis era losses were caused by banker-Wall Street malfeasance (mortgage fraud, securities disclosure fraud), than their own risk appetites and investment decisions.
Short sellers likely made the 2007-2009 financial panic worse, driving housing and securities’ prices lower and causing some firms to fail that wouldn’t have. Scapegoating bankers-Wall Street helped them avoid scrutiny of their crisis era activities and billions in profit.
Even the distressed investors, who bought IndyMac Bank from the FDIC, had an incentive to falsely describe IndyMac as “a mess” and pre-crisis lending decisions made as imprudent or improper, so that they could portray their post-crisis actions as more robust and important and ethical, and justify the billions in profits they made, mostly from letting irrational, panicked markets recover with time.
In 2011, the FDIC’s receiver civilly sued me for $600 million (a figure they got right out of our 2007 10-Q disclosures, with no work!) and accused me of being a negligent banker, because I alone didn’t see the crisis coming and do more than I was already doing. In my 2012 settlement, I DENIED their allegations and importantly they stated that they did not allege I caused IndyMac to fail or the FDIC insurance fund to suffer a loss.
It took a lot of chutzpah for the FDIC to sue me for lack of foresight, when they needed little predictive power to act like a prudent trustee (like The Fed with Bear Stearns assets and Lehman’s bankruptcy trustee) and not fire-sell IndyMac into the worst financial crisis in history. FDIC Chairwoman Sheila Bair told The New York Times’ Paul Krugman just days after announcing IndyMac’s January 2009 sale, “We don’t have really any rational pricing right now for some of these asset categories.”
Here’s an important conflict of interest I don’t recall ever being discussed. The FDIC insures thrift and bank deposits. They have huge incentive to falsely blame bankers and others for their own insurance decisions and fund losses.
We became a thrift in mid-2000, after the FDIC took an entire year to review our nonconforming mortgage lending business and all of our assets and liabilities, and approved us for federal deposit insurance. It was the FDIC’s decision to insure our business model, not ours.
So why did we become a federally-insured thrift?
IndyMac survived the 1998 global liquidity crisis as a mortgage reit, reliant on the capital markets for funding. After, we prudently became a thrift, whereas firms like Goldman Sachs, Morgan Stanley, and GE Capital had to be saved from their liquidity crises and bankruptcy by the federal government, who allowed them to become banks overnight and guaranteed the money market funds, who were buying their commercial paper. During the 2007-2008 crisis, IndyMac was able to pay off all of its capital markets funding and still have over a billion dollars of liquidity, which we maintained until a United States Senator from New York, in June 2008, improperly publicly expressed concerns about us and spawned a bank run. Why did he do that?
For IndyMac Bank, the false mainstream narrative about us rests on the fact that we failed and were seized by the FDIC on July 11, 2008, and we were a major nonconforming (Alt-A) mortgage lender.
Read the excerpts below. One is by a federal judge. Three are from federal court records. Two statements are under oath. One is by the crisis era Federal Reserve Chairman. And two are by crisis era United States Treasury Secretaries.
Tell me, after reading these, if you think IndyMac’s failure is evidence of any malfeasance?
“The Court will briefly discuss the FDIC’s claim that the “Great Recession” was not only foreseeable, but was actually foreseen by the defendants. The Court discusses this claim only due to the absurdity of the FDIC’s position. In sum, the FDIC claims that defendants were not only more prescient than the nation’s most trusted bank regulators and economists, but that they disregarded their own foresight of the coming crisis in favor of making risky loans. Such an assertion is wholly implausible. The surrounding facts, and public statements of economists and leaders such as Henry Paulson and Ben Bernanke belie FDIC’s position here. It appears that the only factor between defendants being sued for millions of dollars and receiving millions of dollars in assistance from the government is that Cooperative was not considered to be “too big to fail.” Taking the position that a big bank’s directors and officers should be forgiven for failure due to its size and an unpredictable economic catastrophe while aggressively pursuing monetary compensation from a small bank’s directors and officers is unfortunate if not outright unjust. The Court finds that defendants are entitled to the business judgment rule’s protection as a matter of law and indisputable fact. Therefore the Court enters judgment against plaintiffs’ claims for negligence and breach of fiduciary duty.”, United States District Judge Terrence W. Boyle, September 10, 2014, Order Granting Defendants’ Motion for Summary Judgment in FDIC, as receiver for Cooperative Bank v. Frederick Willetts III, et.al
“September and October of 2008 was the worst financial crisis in global history, including the Great Depression. Of the 13 most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.” Former Federal Reserve Chairman Ben Bernanke, U.S. Court of Federal Claims, August 2014
“Mr. Paulson said, among other things, that Citigroup Inc. would have failed without government assistance. Mr. Boies entered into evidence an email from one Fed official to another relaying a concern that Morgan Stanley was within hours of collapsing and conveying that Goldman Sachs Group Inc. thought such a chain of events would mean its company was “toast.” Mr. Paulson, pressed about the treatment of different companies in need of government aid, said, “To me, it’s a little bit apples and oranges.” “We did things based on circumstances we faced,” he said.”, U.S. Court of Federal Claims, October 2014 (excerpt from The Wall Street Journal)
“Certainly Citi and BofA were insolvent.”, former U.S. Treasury Secretary Timothy F. Geithner, The New York Times account of his book tour
Besides failing during the crisis, the other reason IndyMac was maligned related to false allegations about our, and the industry’s, pre-crisis mortgage lending standards and practices.
Mortgage borrowers who struggled to pay or defaulted during the crisis were universally portrayed in the liberal press as victims of their lenders. That’s not really true, at least in my experience and in every situation I read about and researched, over the years.
Many people with mortgages experience normal life crises every year, such as disability, other health issues, divorce, and death that impair their ability to pay. Others experienced job losses or significant pay reductions exacerbated by The Great Recession. None of these borrowers were victims of their mortgage lenders though, but all of them deserved help to be able to stay in their home, if they could. And they got a lot of help, not only because it was the right thing to do, but also because it was clearly in every lender and investors’ economic interest to help them. No lender or investor makes money on a foreclosure, especially when home prices are falling.
That said, some mortgage borrowers were neither victims nor deserving of much help.
Because of that 1997 tax law change, after the housing bubble burst, lenders found out that some owner-occupied borrowers were actually speculators. They were flipping houses every few years and taking advantage of the tax free, capital gains treatment. These folks stopped paying right away and some lived rent free for a year or more. Most eventually “walked away” from their mortgages.
Let me clear up a common mortgage crisis misperception. The fact that a borrower’s mortgage is temporarily “underwater” (exceeds their home’s value), has no impact on their ability to pay their mortgage. It only has an impact on their willingness to pay.
Finally, there were some who were using the appreciating value of their homes as piggybanks, to maintain an otherwise unsustainable standard of living. Are the Coronels of Azusa, who pulled $350,000 in cash out of their home, in 11 refinance transactions over the years, a victim of their mortgage lenders? No. Yet The Los Angeles Times never mentioned these facts and others, and falsely portrayed them as victims.
Pre-crisis mortgage fraud-defects were described as massive and rampant, and deliberately ignored by lenders. That’s not true either.
Mortgage fraud and defects are like the terms hate speech and micro aggressions, in that there is no real definition. Check out FHA’s Quarterly Post Endorsement Technical Reviews from the post-crisis, post-DOJ litigation period 2012-2016, which are publicly available online. During this period, FHA initially claims that the industry is delivering 40%-47% unacceptable-serious defect mortgages to them quarter-in and quarter-out. Yet, after mortgage lenders are able to conduct the normal adversarial process to rebut these claims, FHA’s initial claims rate declines by almost 90%, to around 4% to 5%! So what’s the real difference, between pre and post crisis FHA mortgages? The difference is FHA was told by someone in the government, likely the Obama DOJ, to suspend the adversarial process for crisis era mortgage defect allegations, so they could civilly litigate them.
And finally, mortgage securities issuers and sellers of mortgages, were also accused of pervasive mortgage and securities disclosure fraud. Again, that’s not true.
It’s been ten years, enough with the false allegations and hearsay. What was proven in a court of law or admitted to in a settlement agreement? Not much.
In the 2014 BofA-Merrill-Countrywide-First Franklin-DOJ omnibus mortgage settlement agreement, it says “The Parties acknowledge that this Agreement is made without any trial or adjudication or finding of any issue of fact or law.” The DOJ filled Annex 1 with a laundry list of unproven allegations and hearsay, yet BofA didn’t really care, because they never agreed to those allegations. How so? Extract the following from the above statement, “The Parties acknowledge this Agreement is made without any finding of any issue of fact.” Could that be any clearer? The legal spin occurs because the agreement says BofA “Acknowledges” Annex 1. Look up the definition of “Acknowledge”, it means that BofA just acknowledges the existence of Annex 1, not that they agree with anything in it! Why this legal hide-the-ball? So that the civil division of Obama’s DOJ could falsely spin to the American public that BofA admitted to the unproven allegations and hearsay in Annex 1, and perpetuate the false narrative of rampant pre-crisis mortgage fraud-defects.
When the FDIC sued me, they made no allegations about deficiencies in our mortgage lending standards or practices. Neither did the SEC in their civil securities disclosure fraud suit against me, which they lost, almost entirely, on summary judgment.
The U.S. mortgage market is massive. It’s trillions of dollars and tens of millions of borrowers. Yet not a single news article, nor a single crisis era lawsuit or settlement by the government or private plaintiffs provided a statistically-valid sample to support their claims of mortgage fraud-serious defects. Not one.
Most government and private plaintiff lawsuits relied on a relative handful of adversely-selected mortgages…only ones that had gone bad….as evidence of systemic mortgage fraud-defects and underwriting deficiencies. By way of example, the Obama DOJ based its civil lawsuit against Quicken Loans and its FHA lending practices, on just 55 adversely-selected mortgages, out of 246,000 FHA loans Quicken made.
The Obama DOJ sued every major FHA mortgage lender and sought quick, misleading settlements, using the coercive power that the government holds over banks, as a result of federal deposit insurance. This had a two-fold purpose. It helped cement the false narrative about pre-crisis mortgage lending practices, and it helped recapitalize the insolvent FHA insurance fund.
Earlier this year, in March, an important Alt-A mortgage fraud-defect case between trustees for mortgage securities issued by Lehman, who were representing pre crisis, institutional investors who had bought these bonds, and the trustees for Lehman’s bankruptcy estate concluded before a federal judge. The judge required a rare loan-by-loan review of all mortgages. This federal judge ruled against the mortgage securities trustee and institutional investors’ mortgage fraud-defect claims, saying their review was biased and that the court’s review did not support their claim of losses caused by mortgage fraud-defects. In other words, investor losses were most likely caused by other factors, possibly the housing bubble-bust and The Great Recession?
A regulated thrift-bank, like IndyMac, can’t bet on a statistically-improbable, fat-tailed or Black Swan event occurring, even if we thought it possible. And we didn’t. No one really knew what was about to happen, even well into the crisis of 2008.
In the Spring of 2008, Texas Pacific Group and other sophisticated investors, invested $7 billion in Washington Mutual. Just months later, when the FDIC seized WAMU, they lost every penny. They didn’t know either, despite their significant financial expertise and extensive due diligence. To my knowledge, they didn’t blame anyone else or claim they were defrauded. How could they? They made a risky bet, with potentially great upside, and they lost.
The winners in the 2008 financial crisis were a handful of speculators, like those profiled in The Big Short. They mostly used publicly-available mortgage securities disclosures, including monthly loan servicing-delinquency reports, to establish their investment thesis. Isn’t that proof that mortgage securities disclosure fraud allegations by the SEC and others were false? Also, think about why these speculators had to time the exit of their short trades. Wasn’t it because they knew that these securities were oversold and would recover significant value over time? And they did. These speculators took massive risks. They were right then, but several prominent ones haven’t done so well since.
In recent years, Nobel Laureate in Economics Robert Shiller said, “There is still no consensus on why the last housing boom and bust happened. That is troubling, because that violent housing cycle helped produce the Great Recession and financial crisis of 2007 to 2009. We need to understand it all if we are going to be able to avoid ordeals like that in the future.”
I hope I’ve made clear why there hasn’t been any consensus.
Maybe it’s time for President Trump and Congress to appoint a new, truly non-partisan Financial Crisis Inquiry Commission, without any politicians? All the crisis era bankers-Wall Street can now talk and there’s ten years of data, study, research, and hindsight.
Finally, why did the government make so many systemic changes to the financial system post-crisis, including a doubling of bank capital levels and increased liquidity requirements, if it truly was individual banker-Wall Street bad behavior?
Long-time Fed Chairman Greenspan said this in his 2010 paper, The Crisis: “How much of the underlying risk in a financial system should be shouldered solely by banks and other financial institutions? Central banks have chosen implicitly, if not in a more overt fashion, to set capital and other reserve standards for banks to guard against outcomes that exclude those once or twice in a century crises that threaten the stability of our domestic and international financial systems. We have chosen capital standards that by any stretch of the imagination cannot protect against all adverse loss outcomes. There is implicit in this exercise the admission that, in certain episodes, problems at commercial banks and other financial institutions, when their risk-management systems prove inadequate, will be handled by central banks. At the same time, society on the whole should require that we set the bar very high. Hundred-year floods come only once every hundred years. Financial institutions should expect to look to the central bank only in extremely rare situations. At issue is whether the current crisis is that “hundred year flood.” At best, once in a century observations can yield results that are scarcely robust. But recent evidence suggests what happened in the wake of the Lehman collapse is likely the most severe global crisis ever. Since modern financial data compilation began, we never had a “hundred year flood” that exposed the full intensity of the negative tail. The aftermath of the Lehman crisis traced out a startlingly larger negative tail than most anybody had earlier imagined. I assume, with hope more than knowledge, that this was indeed the extreme of possible financial crisis that could be experienced in a market economy.”
Translation, Greenspan said that all pre-crisis risk models, both in the private sector and government, were inadequate in hindsight. He “hopes, but doesn’t really know” if the new, post-crisis ones being built will work. He said that the Fed was responsible for setting private bank capital levels in the U.S.. That they chose to set them to NOT cover “The Hundred Year Flood” or “Black Swan” event. And, at those rare times, they understood that the government would have to come to the rescue of the private banking system, with additional capital and liquidity. Could that be any clearer? Isn’t that why the Fed has roughly doubled post-crisis bank capital requirements?
We can seek the facts and the truth, or we can just keep blaming those greedy and reckless bankers-Wall Street. Everyone hates them anyways.
Mike Perry is a 55-year old, former founding Chairman and CEO of IndyMac Bank. After his thrift failed during the 2008 crisis, he was sued by the government and numerous private plaintiffs for over a billion dollars. He maintains a blog at http://www.nottoobigtofail.org.
“Trustees acting on behalf of those investors had brought claims against the Lehman bankruptcy estate for breaches of representations and warranties in which the bank vouched for the accuracy and quality of the underlying loan documents. The trustees blamed losses in the mortgage-backed securities on so-called liar loans in which borrowers were largely taken at their word…
…While cases like these have proliferated against bank underwriters since 2008, relatively few big-dollar disputes have gone to trial, in part because of the complexity and cost of cross-checking information in loan pools of hundreds of thousands of mortgages against external sources. Other courts have used statistical sampling techniques to produce rough estimates of investor losses. Judge Chapman required a loan-by-loan review that she said failed to turn up actionable breaches “for the vast majority of loans at issue…The trustees said almost 55,000 of the 72,500 loans offered up for trial had inaccurate information about borrowers’ income, debt or occupancy based on discrepancies with tax returns, bankruptcy filings, credit reports and property records…But the judge said she doubted these types of records were always reliable or necessarily showed the loan applications were false. She also criticized the trustees for running what she said was a biased review process and for failing to prove that the value of the underlying loans had been depressed…U.S. Bankruptcy Judge Shelley C. Chapman’s decision marks a loss for investors, mostly hedge funds, which said their claims were worth $11.4 billion, and a win for Lehman’s bankruptcy administrators, who had proposed the $2.4 billion figure. She fixed the investors’ claim after a 22-day trial surrounding 72,500 home loans from before the 2008 financial crisis that bond trustees said were rife with misstatements about the borrowers’ income, their debts and their places of residence…Judge Chapman’s ruling doesn’t allow investors to collect on the entirety of their $2.4 billion claim; they will be paid out on equal footing with other Lehman unsecured creditors who also haven’t been fully repaid.”, Andrew Scurria, “Soured Lehman Claims Valued at $2.4 billion”, The Wall Street Journal, March 8, 2018
“I almost missed this tiny March 2018, Wall Street Journal article. It is horribly written and hides the key point (by regurgitating plaintiff allegations that the federal judge dismissed as biased and unproven at trial), but the key facts are here and support everything I have been saying on this blog. Essentially, that the allegations of rampant crisis-era mortgage fraud (by the Obama government folks at the DOJ, FDIC, and SEC and private plaintiffs such as this case) being the cause of massive MBS investor losses and the financial crisis, were never proven by anyone and in fact, disproven in this significant and highly representative industry case. This article notes (as I have several times on this blog) that almost none of these civil cases (by either the government or private plaintiffs), have gone to trial and so almost none of these cases involve any facts, determined in a court of law. And as the article notes, “Judge Chapman required a loan-by-loan review that she said failed to turn up actionable breaches ‘for the vast majority of loans at issue”…the judge said she doubted these types of records were always reliable or necessarily showed the loan applications were false. She also criticized the trustees for running what she said was a biased review process and for failing to prove the value of the underlying loans had been depressed (by the plaintiffs’ allegation).” Wow! This federal judge’s ruling (which is final and may not be appealed) powerfully refutes the rampant crisis era mortgage fraud allegations made by the Obama government and other private plaintiffs (who wanted to blame their risk-taking and losses on others). It adds huge support to my blog’s key points about crisis era mortgages, but unfortunately comes nearly ten years after the fact and far too late to help anyone defend themselves or their institution.”, Mike Perry, former Chairman and CEO, IndyMac Bank
Soured Lehman Mortgage Claims Valued at $2.4 Billion
Bondholders had valued claims against Lehman at $11.4 billion
The Lehman Brothers building in September 2008. A bankruptcy judge ruled Thursday the bank caused $2.4 billion in damages to investors holding securities backed by shaky home mortgages, ending one of the last remaining disputes in a nearly decadelong liquidation. PHOTO: JOSHUA LOTT/REUTERS
By Andrew Scurria
Lehman Brothers Holdings Inc. caused $2.4 billion in damages to investors holding securities backed by shaky home mortgages, a New York bankruptcy judge ruled Thursday, ending one of the last remaining disputes in the defunct bank’s nearly decadelong liquidation.
U.S. Bankruptcy Judge Shelley C. Chapman’s decision marks a loss for investors, mostly hedge funds, which said their claims were worth $11.4 billion, and a win for Lehman’s bankruptcy administrators, who had proposed the $2.4 billion figure.
She fixed the investors’ claim after a 22-day trial surrounding 72,500 home loans from before the 2008 financial crisis that bond trustees said were rife with misstatements about the borrowers’ income, their debts and their places of residence.
Todd Cosenza, an attorney for the Lehman administrators, said “we are gratified with the court’s well-reasoned and thorough decision, which we believe reflects a fair outcome for all creditors.”
An attorney for the trustees declined to comment.
Neither side can appeal the decision under a trial framework they worked out last year to resolve Lehman’s liability for lapses in underwriting standards on mortgages that it bundled and securitized for resale.
Trustees acting on behalf of those investors had brought claims against the Lehman bankruptcy estate for breaches of representations and warranties in which the bank vouched for the accuracy and quality of the underlying loan documents. The trustees blamed losses in the mortgage-backed securities on so-called liar loans in which borrowers were largely taken at their word.
While cases like these have proliferated against bank underwriters since 2008, relatively few big-dollar disputes have gone to trial, in part because of the complexity and cost of cross-checking information in loan pools of hundreds of thousands of mortgages against external sources.
Other courts have used statistical sampling techniques to produce rough estimates of investor losses. Judge Chapman required a loan-by-loan review that she said failed to turn up actionable breaches “for the vast majority of loans at issue.”
The trustees’ case against Lehman underscored the difficulty in determining whether borrowers were truthful when they took out home loans. Court records show that one applicant, a Stanley Steemer driver, signed loan papers in 2006 saying he earned $6,500 a month. Tax records later revealed his earnings were less than half that, according to the trustees.
Another mortgage-loan applicant purportedly listed a gym membership among his debts but didn’t include two other home mortgages, totaling $205,900. A waitress in New Jersey pledged to move within 60 days to Las Vegas as a condition of her mortgage but filed court papers in a personal bankruptcy case years later suggesting she never did, documents say.
The trustees said almost 55,000 of the 72,500 loans offered up for trial had inaccurate information about borrowers’ income, debt or occupancy based on discrepancies with tax returns, bankruptcy filings, credit reports and property records.
But the judge said she doubted these types of records were always reliable or necessarily showed the loan applications were false. She also criticized the trustees for running what she said was a biased review process and for failing to prove that the value of the underlying loans had been depressed.
Judge Chapman’s ruling doesn’t allow investors to collect on the entirety of their $2.4 billion claim; they will be paid out on equal footing with other Lehman unsecured creditors who also haven’t been fully repaid.
The dispute has been marked by tensions between institutional investors who favored a settlement with Lehman and hedge funds which argued for a higher damages figure and pressured the trustees, who were in charge of the litigation, to go to trial.
BlackRock Financial Management Co., Pacific Investment Management Co. and Goldman Sachs Asset Management LP supported a $2.4 billion deal in settlement talks with the Lehman administrators, but hedge funds including Tilden Park Capital Management LP and BlueMountain Capital Management LLC saw that as a lowballed figure.
Lehman’s bankruptcy proceedings have paid out roughly $122 billion to creditors since it failed in 2008. The Lehman estate still has billions in remaining investments to unwind and is expected to exist in some form for several more years.
Unsecured creditors, who were estimated to receive about 21 cents on the dollar when Lehman’s liquidation plan went into effect in 2012, have now recovered nearly 44 cents and are in line for more. Bankruptcy administrators had set aside reserves to cover potential judgments that can now be distributed. The largest variable in the wind-down is now a $1 billion derivatives trial with Credit Suisse AG that is scheduled to begin in October.
“The Real Clear Investigations 5/14/18 article attached is a MUST READ. There are a LOT of parallels in how the Obama government behaved and lied about the financial crisis and scapegoated crisis era bankers and Wall Street and this phony Russian-Trump collusion…
Here’s two from this article:
1) For the last Obama Administration ICA, January 2017, alleging Trump-Russia collusion, Obama’s Director of National Intelligence Clapper breached standard protocol and did not get the intelligence assessment of the 17 agencies, as required. He handpicked analysts from just three agencies, CIA, FBI (Strock!!!), and NSA and appears to have deliberately excluded normal dissent and third party verification. The Financial Crisis Commission was controlled by Obama Democrats and all the staff worked for them. Not a single Republican on the Commission signed on to the Democrat-only conclusions, yet it was portrayed in the mainstream media that it was a non-political conclusion. Further to this point, Dodd-Frank was passed BEFORE this Commission’s report and findings were finalized and published. In other words, the majority of Democrats who controlled the Financial Crisis Commission knew the political conclusions they were supposed to reach.
2) This January 2017 Obama Administration ICA (Intelligence Community Assessment, by only the 3 agencies, not 17), included a two page summary of the salacious and unverified Steele Dossier, as an appendix. In Bank of America’s coerced (how can a government-regulated, federally-insured deposits and mortgages fight the government?) civil settlement with Obama’s DOJ, regarding crisis era mortgages (primarily related to their Countrywide acquisition), the DOJ attached an appendix to the settlement, which included many salacious and unverified allegations by Obama’s DOJ that were never proven and in which BofA/Countrywide disagreed. So, the “art” (really fraud and libel by the government, as they were misleading the American people and libeling BofA/Countrywide) of the civil settlement had BofA/Countrywide “acknowledging” that the appendix was attached and existed, but not agreeing to anything in it. Don’t believe me? Read it, as I did. I even discussed it at length in a posting at the time on this blog. Go read that too.” Mike Perry, former Chairman and CEO, IndyMac Bank
p.s. By the way, it appears that a key reason a 2-page, summary of the Steele dossier was attached to the January, 2017 ICA briefings to President Obama and President-elect Trump was that it then allowed Obama’s IC folks to leak that fact to the Press, so they could then publish the Steele Dossier in full. How so? Most of the mainstream Press, had copies of the full Steele Dossier for months, but couldn’t verify it, so they couldn’t publish it. Yet they could pretend they were ethical and the IC had verified it (otherwise, why brief two Presidents of the USA on it???), if they knew it had been presented to Obama/Trump in the ICA. And “amazingly” after it was presented to Obama and Trump, the Intelligence Community leaked this fact to the Press and the Press went crazy publishing the salacious and unverified dossier, smearing incoming President Trump, and leading to the appointment of the phony, totalitarian, highly-conflicted/partisan, and possibly illegal Special Counsel Mueller.
“It’s the Establishment versus the rest of us folks. My #2 (President) at IndyMac Bank was part of this Establishment. Stanford undergrad, Harvard Law, liberal Democrat, law clerk, who had worked for a time at the State Department. Even though he ran 90%+ of IndyMac’s mortgage/real estate lending, he wasn’t sued by anyone…
…while I was sued by a dozen plaintiffs, including the FDIC and SEC, for over a billion.
Three of his construction lending subordinates were sued for something like $160 million re. a dozen or so loans and he had signed on roughly half of them, as the most senior lending officer and still wasn’t sued! I have never said this before, but it’s time. He’s a Harvard lawyer, liberal Democrat, former State employee and wasn’t sued by anyone even though he was in charge of nearly all of our lending, as President of the Bank. Why?
My DC lawyers, about as Establishment as you can get, voiced bad feelings to me about my #2 on numerous occasions over the years, implying he had lied about his role and/or thrown me and others under the bus. I also thought it was because he was a Harvard lawyer, who had worked for a top law firm, and these top lawyers (both inside and outside government) all seem to protect each other. By the way, he also rarely wrote an email/memo, whereas (as you know being a FB friend) I wrote thousands…this is a lawyer tactic, to avoid any record or responsibility.
He’s back in the banking business, as a general counsel for a California bank and I was forced (really “extorted”) to accept a lifetime banking ban, in order to get my family out from under a bogus $600 million civil suit with the FDIC, which I denied all the allegations in the settlement. (One of the reasons I have never said this before, is all of the charges against us were bogus. None of us should have been sued.)”, Michael Perry, former Chairman and CEO, IndyMac Bancorp
p.s. My only case that went to court was with the SEC, I won everything on summary judgment! That $160 million case against my #2’s subordinates, they were found liable for ordinary negligence by a civil jury. It was BOGUS and would have been reversed on appeal (for numerous reasons, including not being protected by the Business Judgment Rule), but the FDIC didn’t want that, so they settled a $160+- million judgment against these three individuals for a measly $200,000 +- TOTAL for all three. The FDIC just wanted the phony headline judgment of $160 million to stand. By the way, I was there on the last day of the trial to support these guys. Guess who never showed up?
Key Excerpt from the Lifezette article below:
“Another day and another headline about Mueller’s investigation going overboard. A man, an investigator, evokes fear and trepidation as his ever-watchful eye probes illicitly into people’s deepest secrets. He visits house to house, person to person, and brings both the guilty and the innocent in line to the true faith. A true Stalinist.
The revolt must be quashed. The uprising put down. The leaders imprisoned or ruined. Preferably both.
No, we aren’t talking about the medieval Inquisition. We’re talking about Mueller, an officer of your government. But you wouldn’t know. He neither approaches the law evenhandedly, nor openly. Macbeth warned, “Wanton in fullness seeks to hide themselves.”
Were former Secretary of State Hillary Clinton’s lawyers’ offices ever ransacked? How about those of former Attorney General Loretta Lynch? Of course not. They are both members in good standing with the Establishment. They are protected species. As reported in “Animal Farm,” “With their superior knowledge, it was natural that they should assume the leadership.” Those in the Establishment always assume they know better. The rest of us are just deplorables.
This is not about Republicans versus Democrats. It’s about the Outies versus the Innies. President Ronald Reagan was an Outie. So the Innie, the despicably dirty and corrupt Iran-Contra special counsel Lawrence Walsh, went after Reagan, because he was a threat to the Establishment.”
“If you intentionally manipulated an asset’s marketplace by artificially restricting its supply, causing the asset’s price to rise to astronomical levels and then you sold a chunk of your supply (raising $359 million for yourself) near the top, to hardworking and largely uneducated immigrant American entrepreneurs,…
…many of whom borrowed to finance these purchases, should you be prosecuted for fraud and pay a big fine for this? What if less than three years later, you decided to no longer control the supply, so the asset price plummeted in value and these immigrant entrepreneurs were driven to default on their borrowings and/or declare bankruptcy (significantly impairing their ability to earn a living), should you be prosecuted for fraud and pay a big fine then? What if you are the City of New York and you did this with New York City taxi medallions and to NYC taxi cab owners?”, Mike Perry, former Chairman and CEO, IndyMac Bank
September 10, 2017, Winnie Hu, The New York Times
Taxi Medallions, Once a Safe Investment, Now Drag Owners Into Debt
By WINNIE HU
Uppkar Thind said he has to drive his yellow cab as many 13 hours a day, as he struggles to pay off a taxi medallion that he bought 11 years ago. Credit Caitlin Ochs for The New York Times
Owning a yellow cab has left Issa Isac in deep debt and facing a precarious future.
It was not supposed to turn out this way when Mr. Isac slid behind the wheel in 2005. Soon he was earning $200 a night driving. Three years later, he borrowed $335,000 to buy a New York City taxi medallion, which gave him the right to operate his own cab.
But now Mr. Isac earns half of what he did when he started, as riders have defected to Uber and other competitors. He stopped making the $2,700-a-month loan payment on his medallion in February because he was broke. Last month, it was sold to help pay his debts.
“I see my future crashing down,” said Mr. Isac, 46, an immigrant from Burkina Faso. “I worry every day. Sometimes, I can’t sleep thinking about it. Everything changed overnight.”
Taxi ownership once seemed a guaranteed route to financial security, something that was more tangible and reliable than the stock market since people hailed cabs in good times and bad. Generations of new immigrants toiled away for years to earn enough to buy a coveted medallion. Those who had them took pride in them, and viewed them as their retirement fund.
Uber and other ride-hail apps have upended all that.
Just as homeowners faced ruin when housing markets sank, struggling cab owners in Chicago, Boston, San Francisco and other cities are now facing foreclosure and bankruptcy. Many took out loans to pay for taxi medallions, counting on business that has instead nose-dived amid fierce competition. They are falling behind on loan payments, being turned away by lenders and stand to lose not only the medallions that are their livelihoods but also their homes and savings.
Nowhere is the crisis more dire than in New York, which has the largest taxi fleet in the country. Medallions now sell for a fraction of the record $1.3 million price in 2014, and in many cases, are worth far less than what their owners borrowed to buy them. Even if these owners sell their medallions, they still owe hundreds of thousands of dollars — far more than in many other cities where medallion prices were lower to begin with.
In an unprecedented fire sale of medallions, up to 46 of them are expected to go on the auction block later this month as part of bankruptcy proceedings against taxi companies affiliated with an embattled taxi mogul. While the city has previously held auctions to sell a limited number of new medallions — about 1,800 since 1996 — this is believed to be the first auction to dispose of foreclosed medallions, according to city officials.
While the auction has drawn attention to the precipitous fall of the once-mighty taxi industry, it does not reflect the hardship — and heartbreak — of individual owners like Mr. Isac. It is their stories that often get lost in the larger debate over new technology and commutes, and tell of the human cost of the city’s rapidly evolving transportation landscape.
Since 2015, a total of 85 medallions have been sold as part of foreclosure proceedings, according to city records. In August alone, 12 of the 21medallion sales were part of foreclosures; the prices of all the sales ranged from $150,000 to $450,000 per medallion.
Many more taxi owners say they do not know how much longer they can hold on. Didar Singh, 65, who took out a loan to buy two medallions for a total of $2.6 million in 2013, said he can only afford to pay the interest — $4,816 a month — on the loan. As it is, his taxis do not bring in enough to cover his expenses, forcing him to rely on savings and help from his children.
Sohan Gill once saw his medallion as such a good investment — ”better than a house” — that his wife bought two more in 2001. Now they cannot find enough drivers for the cabs because business is so bad. And Mr. Gill, 63, who had retired from driving, had to go back on the road. “How many more years am I going to drive to take care of these medallions?” he asked.
As recently as three years ago, taxi medallions sold for well over $1 million. Today, some have sold for as low as $150,000. Credit Caitlin Ochs for The New York Times
Gone are the years when taxi medallions steadily rose in value, largely because there was a limited supply of them. The city controls the number of medallions — currently capped at 13,587 — to prevent an oversupply of cabs like what occurred in the 1930s when concerns over congestion, reckless driving and cut-rate fares prompted the city to step in. The last time there was an auction for medallions was when the citysold 350 new medallions in 2014 at the height of the market, generating $359 million in revenue.
But today, yellow cabs are dwarfed by cars working for ride-hail apps, which face far fewer regulations. Taxi owners and their supporters complain that their competitors do not have a similar cap on their cars, and are not subject to strict rules on taxis that cover fares, vehicle equipment and access for disabled people, among other things.
There are more than 63,000 black cars providing rides in the city through five major app services: Uber, Lyft, Via, Gett and Juno. Of those, about 61,000 cars are connected with Uber, though they may also work for the other app services, too.
“We are not against competition, we are not against technology, but we want to compete fair and square,” said Nino Hervias, 58, a taxi owner and spokesman for the Taxi Medallion Owner Driver Association, which represents about 1,500 individual taxi owners, most of whom are immigrants.
Taxi owners have sought to sue the city over what they see as an unfair playing field, with little success. Earlier this year, a lawsuit filed against the city and taxi commission by taxi owners, trade groups and credit unions was dismissed by a federal judge who found that they had failed to show they were denied due process or equal protection.
Mr. Hervias and another driver have also taken legal action, known as an Article 78 proceeding, to compel the city and its regulators to establish and enforce standards that will make sure that all licensed cars — including yellow cabs — “are and remain financially stable.” The case is pending in State Supreme Court in Manhattan, with a court appearance scheduled in October.
Yellow taxis made an average of 277,042 daily trips and collected $4 million in fares per day in July, down from 332,231 daily trips and $4.9 million in fares the year before, according to city data.
Allan J. Fromberg, a spokesman for the taxi commission, said it had taken a number of steps to help struggling taxi owners, such as lifting a requirement for individual owners to personally drive their taxis at least 150 shifts a year, which was not only a burden for older people but also limited the pool of potential buyers for medallions. It has also supported laws that have eased restrictions on who could buy the medallions and significantly lowered the transfer tax on medallion sales.
The commission has also provided financial incentives to defray the cost and maintenance of handicap-accessible cars, Mr. Fromberg said. And it has created a pilot program that is intended to help fleet owners attract more drivers; the program allows drivers to pay a percentage of their earnings during a shift to lease the cab, in lieu of a flat fee up front that puts drivers under pressure and leaves them in the hole if they do not earn enough back.
But for many taxi owners, such measures have not been enough.
Mr. Isac is again leasing yellow cabs since he no longer has his own medallion. At times, he picks up only one passenger an hour. Even so, he is not ready to give up on yellow cabs yet.
“I’m still driving a yellow taxi because I want them to come back,” he said. “I don’t want to see yellow cars disappear from the streets.”
Uppkar Thind, 46, an immigrant from India, said he now has to drive 11 to 13 hours a day and can no longer take time off if he wants to break even. He is paying off a medallion that he bought for $357,000 in 2006 with money borrowed from his relatives and a credit union.
“I worked hard,’’ he said. “I achieved my American dream and it turned into a nightmare.”
A version of this article appears in print on September 11, 2017, on Page A1 of the New York edition with the headline: As Uber Ascends, Debt Demolishes Taxi Drivers
“It is ironic that the Great Depression was produced by government but was blamed on the private enterprise system. The Federal Reserve System explained in its 1933 annual report how much worse things would have been if the Federal Reserve had not behaved so well, yet the Federal Reserve was the chief culprit in making the depression as deep as it was. So the government produced the depression, the private enterprise system got blamed for it, and there was a tremendous change in attitudes…
…When you say ideas are not important, that change in attitudes would not have been possible if the groundwork had not been laid by the socialist intellectuals in the 1920s. It is interesting to note that every economic plank of the 1928 Socialist party platform has by now been either wholly or partly enacted…Financial System: You are fully aware of the weakness of our financial system. Is there any doubt that the weakness owes much to Washington? The savings and loan crisis was produced by government, first by accelerating inflation in the 1970s, which destroyed the net worth of many savings and loan institutions, then by poor regulation in the 1980s, by the increase in deposit insurance to $100,000, and more recently, by the heavy-handed handling of the crisis. You know the litany; I don’t have to spell it out.”, Nobel Laureate in Economics, Milton Friedman, Excerpt from “Why Government is the Problem”, Essays in Public Policy, no. 39, Stanford California: Hoover Institution Press, 1993
“The 2008 financial crisis is pretty much a repeat of the above…government again blaming the private sector (and those on the Left calling for the jailing of bankers) for a crisis caused mostly by government and the rise of socialism under Bernie/Warren…but we no longer have the brilliant Milton Friedman to say as much. P.S. By the way, the entire essay and especially the Q &A is a MUST READ (and is similar to Nobel Laureate in Economics F.A. Hayek’s views)…Mr. Friedman discusses at-length the government-created taxi monopolies (almost fore-telling Uber’s rise, nearly two decades later) and the healthcare crisis and government’s key role.”, Mike Perry, former Chairman and CEO, IndyMac Bank, July 26, 2017