Jefferson County, Alabama: Screwed By Wall Street, Still Paying
POSTED: APRIL 7, 11:47 AM ET | By MATT TAIBBI
The good times just keep coming for Jefferson County, Alabama. Last year I did a story for Rolling Stone about Wall Street's sacking of the Birmingham, Alabama region -- the city was roped into a series of deadly swap deals by a number of banks, most notably JP Morgan Chase, that left the county billions of dollars in debt.
The genesis of the whole affair was a sewer project that crooked local pols turned into a $3 billion money pit; when they turned to Wall Street to help finance their way out of the cost overruns, the banks leaned on the County to take on a series of swap deals that essentially pushed the debt into the future, but at geometrically increasing cost. Among other things, the banks worked through middlemen who bribed the local commissioners into taking the toxic deals. As a result of all of this, Jefferson County not only ended up saddled with an astronomical debt service on its sewer project, it also saw a downgrade in its overall credit rating, which left it paralyzed in its attempts to borrow money to pay for general expenditures.
Those financial chickens are now coming home to roost. Some of the people I spoke with during that story have been in touch lately to give me the gruesome updates. The most recent news is that the County is closing four courthouses in an attempt to save $21 million a year. Beyond that, there has been a spate of ugly news stories. A local judge recently appointed a New Jersey Water Works executive named John Young to serve as the receiver for the JeffCo sewer system. The appointment of the receiver came at the behest of Bank of New York Mellon, the trustee for most of the county's debt -- Young's job will be to jack up sewer rates in order to pay off the $515 million of sewer debt the city defaulted on.
I got a number of outraged emails from County residents who noted that Young's salary will be $500 an hour. This unelected official will be paid $4000 a day for the job of raising sewer rates on citizens who never once voted for a new sewer project, never voted to accept any of the swap deals, and in general were deprived of any input into any of the financing messes once the few elected officials who were involved started taking bribes from the banks. moreAnd apparently, there is NOTHING standing in the way of even more bankster outrages.
How Wall Street Crooks Get Out of Jail Free
March 23, 2011 | This article appeared in the April 11, 2011 edition of The Nation.
When Charles Ferguson received an Oscar for his documentary on the financial crisis, Inside Job, he reminded the audience that “not a single financial executive has gone to jail, and that’s wrong.” Given the abundant evidence of massive fraud, Americans everywhere have asked the same question: Why haven’t any of those bankers gone to jail? If federal investigators could not establish criminal intent for any top-flight executives, didn’t they have enough evidence to prosecute banks or financial houses as law-breaking corporations?
Evidently not. Except for occasional civil complaints by the Securities and Exchange Commission, the nation is left to face a disturbing spectacle: crime without punishment. Massive injuries were done to millions of people by reckless bankers, and vast wealth was destroyed by elaborate financial deceptions. Yet there are no culprits to be held responsible.
Former Senator Ted Kaufman was especially upset by this. Kaufman was appointed in 2008 to fill out the remaining two years of Vice President Biden’s term as senator from Delaware. With no ambition to stay in politics, he was free to speak his mind. He made unpunished bankers his special cause.
It may have been very difficult to prove fraud, but it was not difficult, at all, to simply allow these firms to go bankrupt.
“People know that if they rob a bank they will go to jail,” Kaufman declared in an early speech. “Bankers should know that if they rob people, they will go to jail too.” Serving on the Senate Judiciary Committee, he helped get expanded funding and manpower for investigative agencies. In hearings, he politely prodded the Justice Department, the SEC and the FBI to be more aggressive.
“At the end of the day,” Senator Kaufman warned, “this is a test of whether we have one justice system in this country or two. If we do not treat a Wall Street firm that defrauded investors of millions of dollars the same way we treat someone who stole $500 from a cash register, then how can we expect our citizens to have any faith in the rule of law?”
Kaufman, now retired, sounded slightly embarrassed when I reminded him of his question. “When you look at what we got, it ain’t very much,” he conceded. “I’m genuinely concerned there are a lot of guys walking around Wall Street, the bad apples, saying, ‘Hey, man, we got away with it. We’re going to do it again.’”
If the legal system cannot locate the villains in this story, then “the law is a ass—a idiot,” as Charles Dickens put it. The technical difficulties in making a case for criminal prosecutions are real enough, given the complexities of modern finance. But the government’s lack of response to enormous wrongdoing reflects a deeper conflict of values. Will society’s sense of right and wrong prevail, or will corporate capitalism’s amoral need to mmaximize profit? So far, the marketplace appears to be winning. moreWhat is even more astonishing is the banksters look like they will even escape their crimes against the petty real estate speculators. Since the real estate crowd pretty much organized the settlement of USA and have been in a power position ever since, it seems unlikely that they have no control over the moneychangers. But if this is now true, historians will be writing about this power shift for a long time.
How The Feds Are Caving To Wall Street On Foreclosures
Alain Sherter, BNET | Apr. 8, 2011
The U.S. government surrendered. That’s the only conclusion to draw from reports that federal financial regulators have abandoned state legal officials negotiating a foreclosure settlement with Wall Street banks and instead struck their own deal.
All 50 state attorneys general and multiple federal agencies had joined forces last year to hammer out a pact with big mortgage servicers. Among the terms under discussion was making banks reduce struggling homeowners’ mortgage principal, accept loan-servicing standards, and pay financial penalties for “robo-signing” and related foreclosure abuses.
That looks to be dead. Instead, the Federal Reserve, Office of the Comptroller of the Currency, FDIC and other bank regulators have started signing individual “consent agreements” with Bank of America (BAC), Wells Fargo (WFC) and other large servicers.
Legal experts who have reviewed the government’s agreement (which you can review here) describe it as exceptionally weak. Banks aren’t forced to cut loan balances or pay a fine. They also don’t have to admit any wrongdoing in connection with the robo-signing scandal. Rather, banks are simply required to tighten their internal loan modification and foreclosure processes. Said Georgetown University law professor Adam Levitin, a noted housing finance expert:
The bank regulators are going to provide cover for the banks by pretending to discipline them very hard, but not really doing anything. The public will see a stern [cease-and-desist] order, but there won’t be any action beyond that. It’s as if the regulators are saying so all the neighbors can hear, “Banky, you’ve been a bad boy! Come inside the house right now because I’m going to give you a spanking!” And then once the door to the house closes, the instead of a spanking, there’s a snuggle. But the neighbors are none the wiser.
Feds to states: You’re on your own
The agreement does require loan servicers to hire independent consultants to examine some foreclosures that occurred between 2009 and 2010. But it doesn’t specify what foreclosures are eligible for review, meaning that is left up to servicers. It also puts few limits on the third-parties banks may hire to conduct these reviews. Presumably, such experts won’t be paid based on how many foreclosures they red-flag.
Iowa Attorney General Thomas Miller, who has led the states’ robo-signing investigation, told Bloomberg he’s “disappointed” that the feds are going their own way. He should be. By laying down such minimal requirements and forgoing all punishment, the consent agreement removes whatever negotiating leverage the states may have had. Any real help for homeowners or serious punishment for financial firms is off the table. more