The banksters of Wall Street are seeking another taxpayer ‘bailout’ and immunity

Posted by AzBlueMeanie:

There’s a reason why a majority of Americans approve of the Occupy Wall Street protestors in spite of all the media villagers' derision and right-wing attacks, and a reason why demonstrators all over the country and the world are organizing protests. The banksters of Wall Street are not done ripping us off and then demanding that we bail them out with no one being held accountable for their crimes.

Mike Lux writes at crooksandliars.com RED ALERT: Biggest Bank Sweetheart Deals of All Time?:

The reason is that most people know what too many politicians in Washington don’t: that the big banks on Wall Street have a corrupt business model that recklessly assumes taxpayers will bail them out if their bets don’t pan out, and that their political juice will get them out of trouble if they violate laws and slide around regulations. There are three things in the news that remind us of this sorry story once again, and the American people need to raise holy hell about all of them: another sweetheart deal for Citibank on fraud charges, a new Bank of America maneuver that could turn into the biggest taxpayer bailout of all time, and a faction in the administration trying to ram through a new deal for all the big banks to have their legal issues related to foreclosure wiped away.

First case in point: the astonishing (and so far mostly unnoticed) little slight-of-hand that Bank of America pulled when it switched over its Merrill Lynch-derived toxic assets to a federally insured program. Read this and weep: Bank of America is moving $75 trillion of highly risky derivative contracts “from its Merrill Lynch unit to a subsidiary flush with insured deposits.” The FDIC, which is the government agency that insures bank deposits, is screaming bloody murder, but the Federal Reserve wants to let them do it.

This is a big f’ing deal, friends. Maybe the biggest swindle ever, certainly the biggest government bailout by far if the ship goes down. It makes TARP and Federal Reserve bailouts so far look like chump change. Remember, the Fed bailed out banks to the tune of a mere $16 trillion in 2008, and TARP threw in less than $1 trillion on top of that. Seventy-five trillion dollars is almost 5 times as much. Now, we don’t know how much of the $75 trillion us taxpayers would be responsible for in the end, because we don’t have access to Bank of America’s books, and the company hasn’t failed yet. But to allow taxpayers to be on the hook for this kind of exposure to even some part of a bank’s risky bets is an obscenity beyond belief.

But wait, there's more!

Then there is the latest Citibank settlement. Citibank agreed to pay $285 million to settle charges it defrauded investors in a billion-dollar mortgage security deal, and Citibank didn’t have to admit any wrongdoing. This kind of settlement happens all the time, and is yet another example of a corrupted system: mega-banks pay modest fines on massively fraudulent behavior; no one goes to jail, loses their jobs, or even has to admit wrongdoing. Breaking the law — stealing from and defrauding people— and then having your company stockholders pay one of these modest fines if you do get caught is just business as usual for these huge banks. And everyone in the industry knows it.

Here is a critical point Mr. Lux does not mention in his post. Did Citi Get a Sweet Deal? Bank Claims SEC Settlement on One CDO Clears It on All Others – ProPublica:

In just one year, 2007, Citi marketed more than $20 billion worth of deals backed by home mortgages to investors around the world, most of which failed spectacularly. Subsequent lawsuits and investigations turned up evidence that the bank knew that some of the products were low quality and, in some instances, had even bet they would fail.

The bank says it has settled all of its potential liability to a key regulator – the Securities and Exchange Commission — with a $285 million payment that covers a single transaction, Class V Funding III. ProPublica first raised questions about the deal [1] in August 2010.  In announcing a case, the SEC said it had identified one low-level employee, Brian Stoker, as responsible for the bank’s misconduct.

It made no mention of the dozens of similar collateralized debt obligations, or CDOs, Citi sold to investors before the crash.

A bank spokesman said the SEC would not be examining any of those deals. “This means that the SEC has completed its CDO investigation(s) of Citi,’’ the spokesman asserted in an e mail.

"The $285 million settlement resolves only the Class V Funding III CDO, and we will not hesitate to bring further charges where we determine that there has been unlawful conduct," an SEC spokesman said.

Did Citi get a sweet deal? Some observers think so.

"Citibank arranged countless CDOs that were built to fail, but the SEC apparently limited its case to a single CDO where they had particularly vivid and powerful proof,” says Stephen Ascher, a securities litigator at Jenner & Block, which has sued Citibank on various structured finance transactions.

“This represents extreme caution, at best — and a failure to grapple with the magnitude and harmfulness of the misconduct, at worst."

And finally, Mr. Lux addresses the "foreclosuregate scandal" that I have been posting about:

Check this out:

US state and federal officials plan to give the country’s largest mortgage servicers wider protection against legal claims in exchange for refinancing help for existing borrowers, as talks on a $25bn settlement of alleged foreclosure improprieties advance.

The proposed agreement would settle allegations that Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial engaged in faulty mortgage practices, including employing so-called “robosigners” – agents who processed foreclosure filings en masse without examining the underlying paperwork – that abused homeowners’ rights and led to wrongful home seizures. The banks declined to comment.

Now of course, reporters sometimes get things wrong, and I haven’t heard from the White House whether this story is accurate. What I suspect, in fact, is that there are two factions in the administration, one mostly from Treasury trying to get this done as quickly and quietly as they can, and one among the political staff at the White House who understand how insane it would be politically to give the banks yet another sweetheart deal after the President praised Occupy Wall Street and after David Plouffe told the Washington Post that they will be running against Wall Street in 2012. Understand that what’s spelled out in the Nasiripour story in terms of the legal release for the big banks sounds worse than what Tom Miller was trying to negotiate with them. Once again, big banks would get off with no legal accountability whatsoever for the crimes they committed, and the money they pocketed on fraudulent activities.

* * *

This is a deal that I can absolutely guarantee to my friends in the administration will blow up in their faces badly if they go through with it. All those Occupy Wall Street demonstrators all across the country will be demonstrating against the White House. Labor unions and all the community groups doing bank actions will go crazy. Every economist and consumer group who has been working on the financial reform issue will react very badly. For Obama to run against Wall Street while handing the big banks another sweetheart deal, and getting the negative reaction it would cause, would be untenable. For all these reasons, I don’t think the President will go along with this deal.

Earlier this month I told you that California's Attorney General had pulled out of negotiations joining the Attorneys General of New York and several other states who vow to proceed with investigations and prosecutions. Foreclosuregate Update: California AG rejects settlement:

The fifty forty-five state settlement negotiations between the states attorneys general, the Justice Department and the banksters of Wall Street may be finally, irrevocably off the table. The whitewash settlement for mere pennies on the trillions of dollars stolen by the banksters of Wall Street in securitized mortgage fraud in the casino capitalism of Wall Street coupled with a promise of immunity from further legal liability is an affront to justice and the rule of law. It's time that "somebody's going to emergency, somebody's going to jail."

I still believe that Tom Miller's 50-state global settlement negotiation will fall apart without California and especially New York, which has its own securities laws far tougher than federal law, on board. Foreclosuregate Update: NY Attorney General removed from negotiation team.

I concur with Mr. Lux's conclusion: "We need to start reining in the big banks’ power to wreck our economy, and we can start by not giving them more sweetheart deals and bailouts."