Rackets + Inmates Run Asylum = Banana Republic Recommended
Posted by Larry Doyle on April 12, 2013 8:06 AM |
Not that we needed any further evidence that the inmates on Wall Street are running the asylum in Washington or that our nation is seriously eroding from within, but recent testimony regarding the settlement of the mortgage foreclosure debacle provides it.
You recall the shenanigans within this foreclosure fiasco where the banks often employed individuals for $10/hour to robo-sign documents and illegally foreclose on people’s homes, don’t you? I defined this specific practice and much of what it encompassed as part and parcel of an enterprise that could only be described as racketeering. Well, there’s more.
Just the other day, Congress held a hearing in which we learned that the very banks implicated in the robo-signing were able to determine which individuals received what remuneration from the settlement. I mean, talk about John Gotti being able to determine who got paid how much for their suffering from his selected rackets.
Who was watching over John’s — er I mean the banks’ — shoulders in this process? How about nobody? Yes, nobody. Really? How else to explain this exchange during the testimony?
Senator Warren: I just want to take a look at the Independent Foreclosure Review Payment Agreement details. I think you’ve probably all seen this one page agreement that lists all of the things that the banks did wrong and then boxes for how many people fall into each category and how much money they’re going to be paid. Is that right? You’ve all seen this? [Panel indicates they have seen it.]
And this was put out – who put this out? I think this is put out by the OCC and Federal Reserve. Is that right? As part of the settlement details. So I just want to ask you about this.
It has some pretty amazing categories here. The first category is about service members who were protected by Federal law whose homes were unlawfully foreclosed. It’s got people who were current on their payments whose homes were foreclosed. It’s got people who were performing all of the requirements under a modification who lost their homes to foreclosure.
And it tells how many people fall into each category and how much money the people in that category will receive. And, it ultimately resolves what will happen to 3,949,896 families.
So the question I have is having resolved this nearly 4 million families, who put the people, the families, into each of these boxes. Is that what your firms did. Mr. Ryan?
Owen Ryan, Partner, Deloitte & Touche LLP: No, Senator, we did not.
Senator Warren: So who put them in.
Ryan: I’m not sure how that schedule is prepared. I saw it for the first time yesterday.
Senator Warren: Mr. Flanagan?
James Flanagan, Leader, U.S. Financial Services Practice, Pricewaterhouse Coopers LLP: Same response. We were not involved in the accumulation of that information.
Senator Warren: Mr. Alt?
Konrad Alt, Managing Director, Promontory Financial Group: Senator, I’ve seen the schedule but I’m not familiar with the basis for its preparation.
Senator Warren: So let me understand this. You ran the independent reviews, right. That’s what you got paid to do. And yet, I presume, the only one left is the banks must have put them in these boxes and you made no independent review of their going into these boxes. You were not asked to do that? Mr. Alt.
Alt: No Senator, we were not asked to do that.
Senator Warren: Mr. Flanagan.
Flanagan: No we were not.
Senator Warren: Mr. Ryan.
Ryan: We were not Senator.
Senator Warren: So that leaves us with the banks that broke the law were then the banks that decided how many people lost their homes because of their lawbreaking. And, as a result, how many people would collect money in each of these categories. Is that right Mr. Alt?
Alt: Senator, I’m not familiar with the basis for the scheduling.
Senator Warren: So far as you know, there’s no independent review of the banks’ analysis…you looked at 100,000 cases and the banks have now put 4 million people into categories and resolved finally how much they will get from this review by the OCC and the Federal Reserve.
Bang up job on behalf of the American taxpayer from these individuals and their firms charged with an independent review of this settlement process. NOT!!
What did these firms (Deloitte, Price Waterhouse, and Promontory Financial — Mary Schapiro’s new haunt) get paid for their less than herculean efforts? Thanks to the folks at Wall Street on Parade for exposing:
It has been previously reported that, cumulatively, seven outside consultants hired by the banks received $2 billion in consultant fees. Senator Sherrod Brown asked the witnesses from Deloitte, Pricewaterhouse Coopers and Promontory to provide specifics on their fees.
Only Flanagan from Pricewaterhouse Coopers answered the question. The firm was paid $175 million by Citigroup; $190 million by U.S. Bank; and $60 million by Suntrust Bank. That compares to the cash the three banks agreed to pay to foreclosure victims as follows: Citigroup will pay $306,574,179; U.S. Bank will pay $80,060,193; and Suntrust will pay potential victims $62,555,947.
When the regulators originally fashioned the stipulation for the reviews, it was expected that the consultant fees would run $5 to 8 million.
In the above example, Pricewaterhouse Coopers collected $425 million in fees from the three banks while illegally disposed families and other types of foreclosure victims will receive only $24 million more than that for their pain and suffering, or a total of $449 million.
In class action lawsuits, lawyers are rarely allowed to collect more than one-third of what the plaintiffs receive.
In this case, the consultants collected a sum equal to 95 percent of the cash going to the injured parties.
Folks, this is corruption . . . plain and simple.
When regulators and politicians acquiesce as EXORBITANT payoffs are made to consultants (charged with supposedly representing and protecting the public interest) to look the other way, we experience the full force of the banana republic masquerading as the United States of America.
Do you disagree? Any wonder why there is such little trust and confidence in Washington and Wall Street?
I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.