Short sales end with the homeowner out of the home. This is the most common "penalty" on banks in the mortgage settlement.

Bloomberg News:

While the banks are stepping up efforts to help borrowers stay in their homes, they are still spending most of the settlement on short sales and forgiveness of home-equity loans that allow them to take bad loans off their books. Profits from new lending are increasing even as regulators enforce penalties for modification missteps and foreclosures pursued with fraudulent or missing documents. Last year, mortgage revenue at the four largest lenders -- Bank of America, JPMorgan, Wells Fargo & Co. (WFC), and U.S. Bancorp --surpassed the amount they spent on consumer settlements and investor demands they buy back faulty loans.

“The banks have shown a knack for sidestepping government attempts to have them redress their role in the foreclosure crisis and keep people in their homes,” said Arthur Wilmarth, a law professor at George Washington University in the nation’s capital. “A lot of these efforts end up helping the banks, not the homeowners.”

Lets recap: The Big Banks pay a small (Small in Banker dollars, anyways) "penalty" *cough* to the DOJ for fraudulent foreclosure practices, and agree to review their own foreclosures and decide which homeowners will receive aid from the "penalty" funds paid to the DOJ that are allotted to homeowner aid. Then typically, the Banks are going to punish the homeowner with a short sale of their home that A) Results in the homeowner losing their home, and destroys their credit. B)Helps the Bank complete their obligation to the DOJ. and C)Allows the Bank further forgiveness by erasing home equity loans from their books.

The Big Banks have struck a Trifecta with Eric Holder's Department of in-Justice. For troubled homeowners, there is homelessness and despair, and just a small glimmer of hope.

Why isn't Jamie Dimon in jail?

When an independent analysis of JPMorgan Chase exposed “serious flaws” in the company’s home loans, it did what Wall Street does best, hid the evidence. In documents released this week, officials found proof that the company “adjusted” the critical reviews it received by buying and selling a new set of home-loan portfolios, creating a “sanitized” pool of data in the process. The move allowed the financial powerhouse to gloss over serious faults in its loans and sell mortgages that appeared healthy to the consumer. The suit, which includes a “trove of internal emails and employee interviews,” may be an important stepping stone in the Federal Housing Finance Agency’s landmark $200 billion case.

NYT:

In a 2007 e-mail, titled “Banking overrides,” a JPMorgan due diligence manager asks a banker: “How do you want to handle these loans?” At times, they whitewashed the findings, the documents indicate. In 2006, for example, a review of mortgages found that at least 1,154 loans were more than 30 days delinquent. The offering documents sent to investors showed only 25 loans as delinquent.

A person familiar with the bank’s portfolios said JPMorgan had reviewed the loans separately and determined that the number of delinquent loans was far less than the outside analysis had found.

At Bear Stearns and Washington Mutual, employees also had the power to sanitize bad assessments. Employees at Bear Stearns were told that they were responsible for “purging all of the older reports” that showed flaws, “leaving only the final reports,” according to the court documents.

Such actions were designed to bolster profit. In a deposition, a Washington Mutual employee said revealing loan defects would undermine the lucrative business, and that the bank would suffer “a couple-point hit in price.”

Ratings agencies also did not necessarily get a complete picture of the investments, according to the court filings. An assessment of the loans in one security revealed that 24 percent of the sample was “materially defective,” the filings show. After exercising override power, a JPMorgan employee sent a report in May 2006 to a ratings agency that showed only 5.3 percent of the mortgages were defective.

Such investments eventually collapsed, spreading losses across the financial system.

New York attorney general Eric Schneiderman said that overall losses from flawed mortgage-backed securities from the years 2005 and 2007 were $22.5 billion.

In a statement shortly after he sued JPMorgan Chase, Schneiderman said the lawsuit was a template “for future actions against issuers of residential mortgage-backed securities that defrauded investors and cost millions of Americans their homes.”

Yet U.S. attorney general Eric Holder still has not filed a single criminal charge against any Big Banker, or sent any of them to jail. It's far past time he got started, and Jamie Dimon is just as good a starting point as any.

JPMorgan’s CEO Jamie Dimon won’t be reaping any benefits from the bank’s third consecutive year of record profits. Dimon’s pay will be cut by more than half, the company revealed in an internal report that blamed him for at least $6.2 billion in losses from the “London Whale” trade. Dimon will take home $11.5 million in 2012, including his $1.5 million salary and $10 million in restricted stock—roughly half of his 2011 haul of $23 million. The bank pointed out Dimon’s “egregious mistakes” in the chief investment office that resulted in the Whale flop, for which he “bears ultimate responsibility.”

Via:

Dimon said he "respected" the board's decision, in which he did not participate.

"This was one huge, embarrassing mistake," he said in a Wednesday morning conference call.

Gee, how will the poor man survive?

New York Attorney General Eric Schneiderman filed a civil complaint against JPMorgan Chase for fraud in the selling of mortgage-backed securities. Schneiderman is the co-chairman of a presidential task force formed in January to investigate possible civil and criminal misconduct in the formation and sale of mortgage-backed securities. The allegation is over securities issued by the investment bank Bear Stearns in 2006 and 2007. JPMorgan acquired Bear Stearns in March 2008.

NYT:

The federal mortgage task force that was formed in January by the Justice Department filed its first complaint against a big bank on Monday, citing a broad pattern of misconduct in the packaging and sale of mortgage securities during the housing boom.
...

The complaint contends that Bear Stearns and its lending unit EMC Mortgage defrauded investors who purchased mortgage securities packaged by the companies from 2005 through 2007. The firms made material misrepresentations about the quality of the loans in the securities, the lawsuit said, and ignored evidence of broad defects among the loans that they pooled and sold to investors.

Moreover, when Bear Stearns identified problematic loans that it had agreed to purchase from a lender, it was required to make the originator buy them back. But Bear Stearns demanded cash payments from the lenders and kept the money, rather than passing it on to investors, the suit contends.

Always, it's about the money. No criminal charges, again, because the feds wouldn't receive a cash settlement. Yet over 7,000 Occupy Wall Street protesters have been beaten, pepper-sprayed, arrested, and jailed...bankers? Zero. No justice here.

However, this was done in Schneiderman's capacity as the New York Attorney General, not the task force. A lack of confidence in the task force, perhaps?

When it comes to the vast, corrupting influence of money in politics, historian Thomas Frank has sounded the alarm loudly and often. In “It’s a Rich Man’s World,” one of his recent essays for Harper’s Magazine, Frank writes, “Over the course of the past few decades, the power of concentrated money has subverted professions, destroyed small investors, wrecked the regulatory state, corrupted legislators en masse, and repeatedly put the economy through the wringer. Now it has come for our democracy itself.”

Bill talks with Frank about the power of concentrated money to subvert democracy.

Frank’s book, What’s the Matter with Kansas? was a best seller and his latest, Pity the Billionaire, asks how Tea Partiers and their allies can make heroes of the rich and mighty who ran us into a ditch.

BILL MOYERS: And there's more. One of Senator Johnson's former staffers is now one of JPMorgan's chief lobbyists. And the chairman's present top assistant used to be a lobbyist for a law firm that worked for JPMorgan. I mean, this wasn't a hearing. This was a reunion of the Gambino family.

THOMAS FRANK: Well, look, this is what we call in Washington the revolving door, okay. And this, if your viewers haven't heard of this they need to learn about it right away because this is how Washington D.C. works is that people go back and forth from, typically from Capitol Hill staffs to working for lobby firms or directly for these, you know, the clients of the lobby firms that have to do with the interests that they used to work on when they were on Capitol Hill.

And then they go back and lobby to their former boss, right, and convince him or her to vote one way or the other. And that's how you get ahead in lobbying is you start out working for someone on Capitol Hill, a powerful senator on a given committee. And then you go and essentially sell that expertise, sell that, you know, the fact that your friends with that guy to, you know, to a lobbying firm or to a bank or to whoever. That's totally how it works.

BILL MOYERS: It's an interlocking cartel and it's serious business. How can we claim to have a representative government when they really are representing the people who bought the campaigns and not the voters who voted for them? It's a serious question.

THOMAS FRANK: Well, there are people who, I'm going to get cynical on you here, Bill. There are people who believe that the more money we have in politics the closer we become to a democracy. They think it's better for there to be more money in politics.

Why do they think that? Because they think that the market is a democracy, that markets are democracy and that government is, when government interferes in the economy it's illegitimate by definition. And so the more money we get in there the more it allows entities like JPMorgan to defend themselves against the sort of, you know, the heavy-handed meddling of some, you know, Washington bureaucrat.

Full transcript available here.

Watch A Financial Crisis Will Happen Again on PBS. See more from FRONTLINE.

Frontline: The nation’s largest banks are “a perversion of capitalism” and “a clear and present danger to the U.S. economy.” The Dodd-Frank financial reform legislation passed in the wake of the crisis “may actually perpetuate an already dangerous trend of increasing banking industry concentration.”

These arguments come not from an Occupy Wall Street activist, not from a Tea Party member, but from a scathing report released last week by one of the nation’s top banking regulators, the Federal Reserve Board of Dallas. In a column for ProPublica and The New York Times, reporter Jesse Eisenger described the report as “a radical indictment of the nation’s financial system.”

FRONTLINE sat down on Saturday with the Dallas Fed CEO and president, former banker Richard W. Fisher, to talk about the report and its core argument about “too big to fail” institutions. According to their calculation, the five biggest commercial banks — JPMorgan, Bank of America, Citigroup, Wells Fargo and U.S. Bancorp — hold 52 percent of all U.S. deposits, which means the “too big to fail” problem is with us now more than ever.

Dodd-Frank proposes to solve this problem by giving the government “resolution authority” to dismantle a big bank, but Fisher suggests a better solution is to not allow banks to get so big.

Watch Dodd-Frank Legislation is "Impracticable" on PBS. See more from FRONTLINE.

Fisher argues that now is an ideal time to solve this problem. Regulators feared that aggressive steps to end the “too big to fail” problem during the crisis would further destabilize an already delicate system. But now that the financial system is healthier, and the normal lending and borrowing that keeps the system liquid has been restored, the risks have lessened.

Continue reading »

If you've been hammered by our economy, perhaps this can put just a little grin on your face today...

JPMorgan on Friday reported a 23 percent decrease in profits for the last three months of 2011 as a result of big losses in its investment-banking and trading divisions. JPMorgan, the nation’s largest bank by assets, said it earned $3.7 billion, down from $4.8 billion in the same period in the previous year—a decrease of 23 percent. Net income from the bank dropped 52 percent to $726 million, which includes a $567 million drop that occurred from a debit-valuation adjustment. JPMorgan claimed that without those adjustments, there would be $1.1 billion earnings in its banking division. Net income from the bank dropped 40 percent to $302 million in the fourth quarter. JPMorgan CEO Jamie Dimon said in a statement that the bank is seeing signs of improvement in loan demand and credit quality.