Bloomberg Business reported this late this afternoon
Under a plan announced Tuesday, mortgage lenders will be able to take disputes over home loans to an independent arbitrator. Fannie Mae and Freddie Mac, the mortgage-finance giants, will allow a third party to decide how grievances should be resolved after other options have been exhausted, the Federal Housing Finance Agency said in a statement.
The new arrangement gives lenders, and Fannie Mae and Freddie Mac, a way to avoid the possibility “that a dispute might languish unresolved for an extended period of time, as has often occurred in the past,” FHFA Director Mel Watt said in the statement. FHFA oversees the mortgage companies as part of a government conservatorship.
In part two of our interview with financial analyst and writer
Yves Smith, we look at who wins and losses with the JPMorgan Chase settlement. While the New York
Post accused the Obama administration of "robbingR JPMorgan, Smith breaks down how much the
nation's largest bank will actually have to pay.
AMY GOODMAN: This is Democracy Now!,
I'm Amy Goodman, as we turn to part two right now of
what's being touted as the biggest banking settlement in U.S. history. JPMorgan is set to pay a
record $13 billion fine to settle investigations into its mortgage-backed securities. Five years
ago,the bank's risky behavior helped trigger the financial meltdown,including manipulating
mortgages and ending millions of Americans into bankruptcy or foreclosure. JPMorgan said in a
statement that its latest settlement is an "important step." However, many in the media have
portrayed the deal as unfair to the bank.
We're going to turn right now to Yves Smith. She is a well-known financial analyst, and
she is the founder of Naked Capitalism,the blog. She's also author of ECONned: How
Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.
If you could talk about-how did JPMorgan Chase violate the law?
YVES SMITH:The violated the law part, we're not-we're not completely clear on JPMorgan proper. It's
important to understand there are three legal entities involved. One is Bear Stearns, which they
acquired during the crisis. One is Washington Mutual, which they acquired during the crisis. Jamie
[Dimon] was delighted to buy those both at the time. And we may get into that detail. These are
still financially extremely attractive deals to him. So the idea that Dimon was in any way, shape
or form a victim in doing these acquisitions is really overstated.
But the key part of this deal is that this is about liability to investors.
Goggle DemocracyNow to read the rest of interview.
But the key part of this deal is that this is about liability to investors. So, the government
the government is representing, in this case, a whole bunch of states that have claims against
JPMorgan and the different entities, as well as the FHFA, which-sorry, Federal Housing Finance
Agency, the regulator of Fannie Mae and Freddie Mac, which entered
into its own deal. But basically, the bank sold-these different banking entities sold bonds
to investors that they said would be of a certain quality, and they were way short of that. And
then, it was because they were, you know, lousy borrowers. They basically would say that it had a
higher loan-to-value ratio; that the fellow had income, and he didn't; that it was a primary
resident, and it wasn't-those sort of misrepresentations.
AMY GOODMAN: Is this evidence that the Obama administration is getting tough on Wall
YVES SMITH: I don't really buy that theory, because the thing that brought Jamie Dimon to the table
was actually a criminal investigation which was initiated in 2007 under the Bush administration. It
takes a long time to develop these prosecutions of these complex criminal frauds. So that's why
it's been such a long lead time. And this settlement has been under negotiation for some time.
There have been various investors, private investors, as well as the government, that has been
pursuing these investor claims. So this has been sort of cycling through on all kinds of fronts.
These suits-you know, for example, different other banks, Bank of America and, I believe, HSBC has
settled their investor claims with the government. So those claims-they're just cycling through
those kind of settlements right now.
AMY GOODMAN: Yves Smith, can you talk about the pain that was caused by this? It's
always talked about in these sort of very un-understandable financial terms, macro terms, so it's
hard to really understand, though millions of people felt what JPMorgan did.
YVES SMITH: Well, there-again, this part of the settlement actually doesn't get to the pain. That
was a settlement we had last year. The settlement last year was the part there was a huge
federal-state settlement last year that was supposed to be about the
homeowners. But in this case, this-these settlements are all about the investors. And so, you
know, to your point, what JPMorgan is going to pay in this settlement is larger than what it paid
in the settlement last year to homeowners. I mean, that just intuitively seems extremely unjust,
you know, the fact that investors are basically going to get a bigger dollar compensation out of
all these banking entities than homeowners got last year. I mean, that's crazy by anybody's
AMY GOODMAN: You said that-you started to talk about how this money will be paid.
YVES SMITH: Mm-hmm.
AMY GOODMAN: Can you continue that?
YVES SMITH: Yeah, it's very complicated, because this is being presented as one settlement. That's
part of how the numbers got so big. And, in fact, it's a whole bunch of settlements that have been
piled together. That's why the numbers are so large. So, the biggest piece of this is from the
Federal Housing Finance Agency. That's the regulator of Fannie Mae and Freddie Mac. They bought a lot of subprime bonds and some subprime loans. And that's the issue I mentioned earlier, where they were promised steak, and they got hamburger that was significantly green. So, that's a-what they call in the law a contract claim. They were promised X, they got Y. It's no different than if you
bought a car and discovered it was a clunker and went back to the manufacturer and said, "Hey, you
know, either fix this car or give me a new one." The concept is exactly the same as that of these
suits. So it's all-these are all contract claims, except-except for one piece, which
is a fine that comes at-which is a-there's apparently a civil fine that's about $3 billion.
That's the one piece that's different. The rest of the deal is all about that kind of liability,
the getting-hamburger-when-you-were-promised-steak issue.
AMY GOODMAN: CNN host Erin Burnett argued last week on her program, Out Front, that JPMorgan is being forced to pay for things that it didn't do. Burnett said, quote, "Just because [JPMorgan] can afford it doesn't make it right. Going after companies, of course, should be based on wrongdoing, not on who has the money. And the truth in the case of JPMorgan's $13 billion fine is that many of the problem mortgages that they're paying for now stem from two acquisitions the bank made during the depth of the financial crisis." Burnett added, quote, "Five years ago, JPMorgan bought Bear Stearns and Washington Mutual. These were hastily arranged deals brokered by Uncle Sam. In fact, many would say the fair word to use is 'forced by Uncle Sam."' Yves Smith?
There's more, go google DemocracyNow for complete interview
Dismissing Sander’s argument, Norquist posited that the government is receiving little in revenues due to high unemployment or not making enough in taxable income, to which Sanders replied that the debt and deficit has grown because of financial scandals on Wall Street enabled by deregulation.
“I’m talking to the senator who opposed the effort to rein in Fannie Mae and Freddie Mac which gave us the recession that we had,” Norquist shot back. “That was government policy — it was big government policy. It sure wasn’t deregulation.”
“Our good friends on Wall Street just are so honest, so conservative in their fiscal investments,” Sanders said sarcastically. “They had nothing to do with the deficit, and it’s the big, bad government that forced them into derivatives, that forced them to merge, that forced them to become too big to fail. It’s always the government.”
“Are you unable to say Fannie Mae and Freddie Mac? Are you incapable of saying those two words,” Norquist asked.
“Are you unable to talk about the illegal behavior on Wall Street,” Sanders countered.
When and where? Also why would saying a white man with ego is racist? We are know that racist distinction was earned by white men exclusively.
Black people have every right to call white people anything that comes to mind, considering for 400 years white had that privilege.
From the beginning of the FHFA control over GSE's, the only real accomplishment was cooking the books
The Senate Banking committee is the fox guarding the hen house (Big Banks)
Remember this is a legal matter and can only be solved legally because the powers that created this matter know they are wrong and won't ever admit they're wrong by releasing
Regardless, Nader looks white, could pass for white. If you're white I wouldn't blame him for saying the same thing to you jpd (pos)
I know what white people did and still do, so darn skippy I agree with Watt saying what he said, if he really said it
Just for comparison, can anyone name any?
Also why did Treasury get 1.7 Billion from 2.1 Billion profit if 210 million is 10% of 2.1 billion?