From the NYT:
JPMorgan Chase and the Justice Department have reached a tentative $13 billion settlement over the bank’s questionable mortgage practices leading up to the financial crisis, a record penalty that would cap weeks of heated negotiating and underscore the extent of the bank’s legal woes, people briefed on the talks said on Saturday.
To resolve an array of federal and state investigations into the bank’s sale of troubled mortgage securities to investors, the bank would be expected to pay about $9 billion in fines, according to one of the people. JPMorgan, the nation’s largest bank, will also very likely provide about $4 billion in relief for struggling homeowners, another person briefed on the talks said.
It would also deal a reputational blow to JPMorgan, which emerged from the crisis relatively unscathed. Until this month, when the bank reported a quarterly loss tied to its varied legal expenses, the bank continued to earn money at a record pace. ...
$13 billion here, $13 billion there, pretty soon that adds up to ... well, not really all that much money in the context of the Mortgage Meltdown.
Many of the cases involve mortgages that JPMorgan itself did not sell. Rather, the bank inherited the legal liabilities when it bought Bear Stearns and Washington Mutual at the height of the financial crisis.
It's worth taking a look back at Washington Mutual's TV commercials. Here's another one. Notice a theme?
On 2/1/09, I profiled Washington Mutual's CEO Kerry Killinger in VDARE. Killinger had built WaMu into a giant by buying 29 other financial institutions over the previous two decades:
How did the Community Reinvestment Act worsen imprudent lending to minorities?
It's not a popular question even to ask. "I want to give you my verdict on CRA: NOT guilty", said FDIC Chairman Sheila Bair:
"And 'Let me ask you. Where in the CRA does it say to make loans to people who can't afford to repay? Nowhere.' The facts are simple, Bair said. The lending practices that are causing problems today were driven by a desire for more market share and revenue growth, not because the government encouraged certain lending practices." (FDIC's Bair Sets to Shatter CRA "Myth", by Kelly Curran, HousingWire.com, December 5, 2008.)
Okay–but how does a bank get more market share and revenue growth?
One major way: by buying other banks. And to do that, you have to pass through the CRA gauntlet. If you aren't willing to lend to people the government wanted you to lend to, then you were out of luck at mergers and acquisitions game.
So, the CRA implicitly selected for Kool-Aid Drinkers, such as WaMu's Killinger. They're the ones whom the government allows to build empires. (Unfortunately, their houses turned out to be built on sand.)
I missed understanding the impact of the CRA because I kept asking myself: "How could the CRA force a banker who thinks lending more to minorities is a bad idea to lend more to minorities?" I kept trying to imagine the CRA's effect on the already crazy-stupid WaMu, and how that couldn't have been all that significant.
But I should have been thinking about the other side of the coin: all the sane-smart banks that didn't get to get big like WaMu did because the government rigged the acquisition process so that crazy-stupid banks were more likely to get merger approval. WaMu got permission from the government to make 29 acquisitions from 1990 onward. A smart-sane bank wouldn't.
That WaMu sincerely believed that it was going to make a fortune handing big mortgages to mariachi singers, illegal immigrants, and Department of Motor Vehicle clerks etc. etc. seems clear. After all, WaMu not only originated about one out of every eight mortgages in the U.S., but it also held on to a fair number of them instead of securitizing them and dumping them on Wall Street.
WaMu explained its minority-oriented strategy over and over again. Robert O'Connor wrote in Mortgage Banking, October 2003:
"… Porter says that Washington Mutual takes the CRA very seriously. But he adds the bank regards the CRA as a floor rather than a ceiling. He says the company, and its employees, want to surpass the regulatory standard for institutions to meet the credit needs of their communities. Porter points out, for instance, that the bank's $375-billion, 10-year lending commitment was not necessarily dictated by the CRA. 'It was good from the company's perspective,' he says. 'It was good from the community perspective, and it actually gives us a higher bar that we want to achieve.' …
"Despite the strength of its portfolio operation, Washington Mutual is also committed to the secondary market. Early this year, it entered into a five-year strategic alliance with Fannie Mae Fannie Mae: to encourage home-buying among a number of groups, including immigrants, minorities, first-time buyers first-time buyer first-time buyer and people with low and moderate incomes. The goal is to generate $85 billion in mortgage lending."
And here's a 2003 WaMu press release that sounds like Dave Barry wrote it:
"Helping to build strong, vibrant communities wherever Washington Mutual does business is integral to the company's long-term strategy. The Community and External Affairs Division oversees all community investment and development activities to ensure that Washington Mutual fulfills its community goals in the most strategic way possible."
Why was WaMu, with its derisible strategy, able to buy out so many big lenders?
To understand it, think about it the other way around: why didn't more prudent financial institutions outbid WaMu for acquisitions? ...
The CRA drives the climate of opinion in the entire mortgage industry. If you wanted to be able to buy other banks, you had to play ball.
... Over time, the madness infects the entire culture of finance, as the government labels the prudent bankers automatic losers in the great game of acquisitions.
WaMu's 2001 purchase of Dime Bank [when it promised $375 billion in minority and lower income lending] may have been its crowning excess. But in the history of the downfall of the American economy, it wasn't as important as WaMu's 1990s move into California. WaMu and California went together like a match and dynamite.
In 1997, WaMu was the second biggest thrift. When the biggest thrift, Home Savings of America (owned by H.F. Ahmanson and Co. of Irvine, CA), attempted a hostile takeover of its Southern California rival, the number three thrift, Great Western, WaMu entered as a white knight. This set off a CRA bidding war. The two competed to see who could promise the most lending to the politically favored.
The Seattle Times headline on April 10, 1997 read "Wamu Loan Plan Trumps Rival—$75 Billion Inner-City Proposal Eclipses Ahmanson Bid." Reporter Don Lee wrote:
"In the largest inner-city loan program ever proposed by a U.S. banking institution, Washington Mutual said today it will lend $75 billion to mostly lower-income and minority borrowers over 10 years if it successfully acquires Great Western Financial. Washington Mutual said the majority of those mortgages, consumer and small-business loans would be made in California. The proposal eclipses a $70 billion community reinvestment commitment made three weeks ago by Home Savings of America."
After winning Great Western, Washington Mutual then bid for Home Savings itself in 1998, upping its Community Reinvestment ante to $120 billion.
Grabbing Home Savings made WaMu the nation's number one lender of adjustable-rate mortgages. ...
Then, when WaMu bought Dime Bank in 2001, it made a binding promise to lend for Community Reinvestment Act credit $375 billion. Sure, why not?
The only problem is that $375 billion here, $375 billion there, pretty soon you are talking about real money.
Read the whole thing there.
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23 comments:
http://kdvr.com/2013/10/18/another-southern-colo-transgender-student-denied-access-to-girls-restroom/
Transsexual harassment.
'I wanna wee wee in your washroom cuz I feel like a woman.'
Btw, how come there aren't any girls who feel male who wanna use the boys' washroom?
Using this logic, trans-boys-who-feel-like-girls should also share the girls locker room and shower with the girls too, right?
JP Morgan Chase runs the infrastructure behind the food stamp program. So of course the Feds, whose chief exec is the Best Food Stamp President Ever, weren't going to tread hard on them.
Bankers from the last century? Cool - so where are the guys with yarmulkes?
Even if you accept that it's ok to engage in this sort of racism, it's one thing for them to depict traditional bankers as what they were - white men, mostly. It's quite another for them to fail to depict the diversity within that crowd. The evil "traditional bankers" they depict are all WASPs.
Looking at WaMu CEO Kerry Killinger's campaign contributions at Opensecrets.org (3 pages worth), you get the portrait of a spineless, corrupt CEO with no ideology but greed - he gave to Democrats, he gave to Republicans, and he gave oodles and oodles to WaMu's PAC, which did likewise.
Stevil always aside from the narrative. His memory amnesia
hidey-hole seems inoperative.
Hate that when that happens but
not really.
eproadmStevil always aside from the
narrative. His memory amnesia
hidey-hole seems inoperative.
Hate that when that happens but
not really.
"The evil "traditional bankers" they depict are all WASPs."
For the most part. The guy reading the WSJ at :28 looks Jewish, but not stereotypically so.
Just think. If it had worked and all those illegal immigrants, etc., had become model American middle-class citizens, just by endowing them with mortgages, it would have meant that America really could rule the world by promising to bring universal prosperity!
Indeed, it would probably mean America ruling the world was a moral imperative. All it would take is money. Given the secret of turning the downtrodden into prosperous yuppies, who can deny that it would be evil to keep American from bringing America and the American system to everyone the world over?
And think of all the new taxpayers and customers! ROI!
Freedom for aggression, indeed.
Great reporting. This is too true to be other than heresy. The whole stinking mess is rotten to the core. But, the rest of the world is even worse so I suspect it could go on for some time.
this is the kind of article that makes you a national treasure
Alan Geenspan still insists that the recession had nothing to do with the housing bubble. But he's learning. The Wall Street Journal has an article, "Alan Greenspan: What Went Wrong", Alexandra Wolfe, Oct. 18, 2013:
"I've always considered myself more of a mathematician than a psychologist," says Mr. Greenspan. But after the Fed's model failed to predict the financial crisis, he realized that there is more to forecasting than numbers. "It all fell apart, in the sense that not a single major forecaster of note or institution caught it," he says. "The Federal Reserve has got the most elaborate econometric model, which incorporates all the newfangled models of how the world works—and it missed it completely." He says JP Morgan had put out a forecast three days before the crisis saying the economy was on the rise. And as late as 2007, the International Monetary Fund also said that global risk was declining. ...
...
... Studying the results of herd behavior provided him with some surprises. "I was actually flabbergasted," he says. "It upended my view of how the world works."
...today he realizes the full impact of emotions and instincts on markets."
Well, that's just great. Now he learns about it! Where do we get these guys, again? And why do we give them so much power? And weren't chumps like him "taken to the bank" by those who did understand how the world works but needed "cover"?
Steve, sorry to follow-on on an off-topic comment, but since you allowed it ...
Using this logic, trans-boys-who-feel-like-girls should also share the girls locker room and shower with the girls too, right?
Of course, there is a campaign going on whose aim is to have the hoi polloi convinced that if a boy/man feels he is girl, the he is a girl/woman, and woe to the non-believer.
If you doubt they won't manage to convert the majority, you're seriously mistaken.
The next step, say in a couple of years, will persuade us that if a 20, 40, or 60 something feels like a teenager at heart, who are we to prevent sex between 2 teenagers, one 14, the other 54.
You said back in the V-Dare 2009 article you link to that banks like to use architects to puff their physical appearances up.
Totally true.
I learned this at a fairly young age. For about a year and a half, my mother dated an engineer who worked for St. Louis-based Bank Building Corporation (officially "Bank Building and Equipment Corporation of America"). That was one of the several things about his job that he taught me. He and my mother broke up not long after the business filed for bankruptcy in '90.
This is amazingly insightful and clearly there result of years of clear thinking about this issue. It reminds me of an Agatha Christie detective gathering everyone in one room at the end and explaining how the crime was committed.
You even explain how you were on the wrong track and then suddenly looked at the other side of the coin and it all came together.
New name for the NFL's Washington R******s: the Washington Mutuals. Problem solved.
Humphrey 29.9% 148,869
Nixon 63.1% 314,905
Wallace 6.6% 33,034
Other 0.4% 1,899
Orange
Humphrey 36.6% 7,481
Nixon 52.9% 10,818
Wallace 10.3% 2,100
Other 0.2% 47
Imperial County. This is the 1968 results on the election and many liberals or leftist have complain that the OC is very racists in fact going back to 1968 it voted less for Wallace than did Imperial County. Imperial County had a lot more Mexicans compared to Orange in 1968 since it was farm area. However, today its majority Mexican about 80 percent, so probably the results would be different. Liberals have overemphasized racist and the least racists counties in 1968 where the Bay Area and La since they voted only over 5 percent for Wallace. Today La is know for hate crime more than its neighbors because of Mexicans and Blacks hitting on each other.
But Sheila Blair said......
The whole point of redlining was not lending to people with bad credit scores and these areas were easily identifiable. The whole point of CRA was missed by Shelia Blair.
1. There was a huge amount of bank consolidation in the 1990's to the early 2000's, so 29 acquisitions isn't all that unusual (there used to be lots of vary small banks with 8 or ten branches and that's it).
2. The lowering of lending standards was not a result of government policy, the CRA had been around for years: it was the result of culture change not policy change.
"The lowering of lending standards was not a result of government policy, the CRA had been around for years: it was the result of culture change not policy change."
CRA helped lead to the acceptance of lower lending standards for home buyers, which ultimately became industrywide. It was not the direct cause of the bubble - most subprime loans were issued by mortgage lenders unaffected by it - but without it, there would have been no housing bubble.
"The whole point of redlining was not lending to people with bad credit scores and these areas were easily identifiable."
Was redlining just about bad credit scores, or was it about not lending in areas where property values were destined to slump, undermining the bank's collateral?
The lowering of lending standards was not a result of government policy, the CRA had been around for years
Except that Clinton's lesbian Assistant Secretary of the U.S. Department of Housing and Urban Development said that she was going to use the law to force banks to make bad loans because that is a function of government.
Hey, I've seen that actor before. I think his name is "non-threatening black guy".
"Anonymous said...
2. The lowering of lending standards was not a result of government policy, the CRA had been around for years: it was the result of culture change not policy change."
Or maybe it just took awhile for "community organizers" (otherwise known as "extortionists") to figure out how to use CRA to their advantage. RICO existed for more than a decade before the government figured out that it could use it against anti-abortion protesters.
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