Several months ago, the nation’s biggest banks became embroiled in the “robo-signing” scandal, when it became clear that they had been approving thousands of foreclosures without verifying the proper documents or guaranteeing borrowers due process. The banks submitted fraudulent documents to courts and were forced to halt their foreclosures processes entirely as they sorted out what happened. “I had no idea what I was signing,” said one Bank of America employee. “We had no knowledge of whether the foreclosure could proceed or couldn’t, but regardless, we signed the documents to get these foreclosures out of the way.”
Robo-signing people into foreclosure is bad enough. But as it turns out, the practice may not have been limited to residential mortgages. American Banker, in fact, notes that JP Morgan Chase may also have been robo-signing credit card deals:
JPMorgan Chase & Co. has quietly ceased filing lawsuits to collect consumer debts around the nation, dismissing in-house attorneys and virtually shutting down a collections machine that as recently as nine months ago was racking up hundreds of millions of dollars in monthly judgments…It is unclear whether Chase has stopped pursuing collection on many claims nationwide, or if intends to pursue the debts in some other fashion. The bank has not explained its apparent moratorium and declined comment.
Chase’s halt does, however, follow scattered defeats in state courts and a whistle-blower’s allegation that it falsely overstated the balances of thousands of delinquent accounts it sold to a third party. Former Chase employees and debt collection experts insist that the bank would not have abruptly retreated from its collections efforts in the absence of trouble. [...]
Robo-signing, or the high-volume production of signed legal documents, has been a key element of the governmental and media foreclosure reviews. Chase’s current pullback raises at least the possibility that at least some banks may have documentation problems in other business lines…”If sloppy record keeping and problems with false affidavits is a problem with mortgages, it’s 100 times bigger in credit card accounts,” says Michelle Weinberg of the Legal Assistance Foundation of Metropolitan Chicago.
As one finance blogger put it, “When a bank leaves money on the table for no obvious reason, you know that something’s not quite right.” It seems that JP Morgan, and who knows how many other banks, were attempting to collect on debts without being certain that the amount they were asking for was accurate. One whistle blower looked at $200 million in JP Morgan customer accounts and claims to have found that “half the accounts lacked adequate documentation of judgment and one-sixth listed the wrong amounts owed.”
Banks have been robo-signing documents since as least 1998, as an Associated Press investigation found, and its not all that surprising that a practice that worked so well for so long (at least in the eyes of the banks) would have migrated to other areas.
By: Pat Garofalo, Think Progress, January 17, 2012
Thank God for elections and election years. An election gives our president, who must face the voters in November, permission to think and act like a partisan. It’s long overdue.
President Obama has boldly made key recess appointments to the National Labor Relations Board (NLRB) and to the Consumer Financial Protection Bureau (CFPB). The Republican strategy has been to destroy these agencies by failing to confirm appointees. In the case of the new CFPB, that meant nobody in charge to make key decisions to make the new bureau operational. In the case of the NLRB, it meant the lack of a quorum would paralyze the agency altogether.
In naming Richard Cordray to head the CFPB, the president has called the Republicans’ bluff. This was the agency that Elizabeth Warren invented and dearly hoped to lead. Republicans made clear they would block her appointment. When Obama passed her over in favor of the less-well-known Cordray, former Ohio Attorney General and also a strong consumer advocate, Republicans blocked his confirmation, too.
The selection of Cordray, an activist very much in the spirit of Warren, is in many ways a tribute to her leadership in fighting both for a strong consumer protection agency and a strong leader to head it. Cordray is that leader. Consumers will finally have an agency to keep watch for abuses that do not only harm small borrowers but aggregate to major threats to the financial system. Had there been a consumer bureau in the Warren spirit a decade ago, it would have noticed that sub-prime loans were not only ripping off homeowners but threatening to take down the economy.
In the case of the NLRB, the agency, which protects the right of workers to organize or join a union free from employer harassment, would have been totally paralyzed. The Republicans said as much. Here’s what Obama said, in naming Richard Griffin, Sharon Block, and Terrence Flynn to vacant seats on the NLRB:
When Congress refuses to act and as a result hurts our economy and puts people at risk, I have an obligation as President to do what I can without them. I have an obligation to act on behalf of the American people. I will not stand by while a minority in the Senate puts party ideology ahead of the people they were elected to serve. Not when so much is at stake. Not at this make-or-break moment for the middle class.
Well said. These actions define a president who is leading, not searching for futile compromises. It exposes both the Republican obstructionism, the unprecedented tactic of destroying agencies by refusing to allow confirmations, as well as the Republican hostility to agencies that defend regular Americans against powerful corporate elites.
Predictably, the Republicans, having invented new forms of obstructionism such as the use of the filibuster on ordinary legislation and not special cases, as well of refusal to consent to routine extension of the debt ceiling, now cry foul when Obama uses a constitutional provision, the recess appointment, which has been conventional for presidents of both parties. Their contrivance of a fake nominal session when Congress is actually in recess is shameless. The more of a fuss they make, the more they out themselves as defenders of the one percent.
As in the case of the extension of the payroll tax cut, this conciliatory president seems to be warming to the concept of maximizing partisan advantage, particularly when the Republicans hand him opportunities on a platter. Just to make sure that message did not lost, Obama chose Cordray’s hard-pressed home state of Ohio for his announcement of the appointment, and painted Republican obstructionists as allies of Wall Street.
The citizenry loves a fighter far more than a punching bag. The right hates Obama. In the spirit of Franklin Roosevelt, he might as well earn that hatred.
By: Robert Kuttner, The American Prospect, January 5, 2011
For Mitt Romney, the fundamental argument underpinning his presidential candidacy is his experience as a top executive at Bain Capital, the huge Boston-based private equity firm. That is especially true now because he must disown his most important achievement as Massachusetts governor — health care reform — in order to assuage the Tea Party extremists in his own party. But what does his business career tell us about the economic policies that might be pursued by the Republican front-runner — and about his worldview? Much could have been gleaned from the career history of George W. Bush, if only voters had paid closer attention to the unflattering reports of his experience as oilman and baseball team owner that accumulated in 1999 and 2000.
As the stories behind Romney’s success unfold in the coming campaign, the answer is likely to be that Bain Capital has prospered during the past quarter-century promoting a harsher brand of enterprise — one that ruins communities, impoverishes workers, and exports American jobs, all in the name of shareholder “value.”
In the current issue of New York Magazine, reporter Benjamin Wallace-Wells begins the process of unpacking what Romney and his colleagues in management consulting and private equity have wrought upon the U.S. economy. Wallace-Wells opens his narrative with a telling recent anecdote from the campaign trail in Iowa, where Romney lectured a disbelieving crowd on the issue of corporate personhood. When a heckler urged raising taxes on corporations, Romney replied with condescension: “Corporations are people too, my friend….”
Of course in the strictest sense he was right: The management, shareholders, and workers of every corporation are indeed human beings, and it is to those human beings that the money earned by corporations, after taxes, is paid. But as Wallace-Wells discovers, Romney and company have done much to change how those earnings are apportioned, encouraging massive increases in the amount appropriated by management and huge reductions in wages and benefits paid to workers. Creating incentives for managers to maximize stock prices — which would explode their own compensation — simultaneously undermined old-fashioned corporate responsibility toward employees, communities, and the nation as a whole. The deepest implication of the consultant creed that Romney represents is an ugly Darwinism — or so Wallace-Wells suggests.
But as consultants, there was only so much that Romney and the Bain crowd could do to change any corporation. Wanting to put their theories into practice, and sensing that big profits could ensue, they formed Bain Capital, whose record in corporate takeovers and turnarounds became the envy of the industry — and the ruin of thousands of workers and their families unlucky enough to become collateral damage.
The improved efficiency and productivity of private enterprise over the past two decades certainly were not without benefit to society, in lower prices, better technology and even, for a while, higher employment. But the perfect “alignment” of incentives between corporate managers and shareholders, without any regulatory brakes, led to worsening economic inequality, executive recklessness, stock manipulation, and a laser-like focus on the short term — in short, all of the ills that underlie American economic decline. Those same incentives have been trained on the political system to ensure decisions that benefit those same overpaid, seemingly sociopathic bankers and investors — now known as the “one percent.” They could scarcely hope for a more sympathetic candidate than the man from Bain.
By: Joe Conason, The National Memo, October 25, 2011
An upcoming report by the Federal Trade Commission shows that brand-name pharmaceutical makers continue to cut questionable deals with generic manufacturers that delay the introduction of cheaper drugs onto the market.
Such pay-for-delay arrangements hurt consumers and increase costs for federal programs such as Medicare and Medicaid, according to the report, a copy of which was obtained by the editorial board. These deals are not illegal, but they should be.
Pharmaceutical companies rightly enjoy strong protections for products that often take years and billions of dollars to develop. These protections were so strong at one point that they discouraged would-be competitors from jumping in. The Hatch-Waxman Act of 1984 meant to address this problem by allowing generics to market “bio-equivalent” drugs as long as they did not infringe on the brand-name drug’s patent; the generic could also proceed if it proved the brand-name patent was invalid. The goal was to enhance competition and lower drug prices. That goal is thwarted when brand-name manufacturers engage in the popular practice of paying generic-drug makers to keep their products off the market.
In 2004, the FTC did not identify a single settlement in a patent litigation matter involving drug makers that raised pay-for-delay concerns. In its new report, the agency points to 28 cases that bear the telltale signs of pay-for-delay, including “compensation to the generic manufacturer and a restriction on the generic manufacturer’s ability to market its product.”
Sens. Charles E. Grassley (R-Iowa) and Herb Kohl (D-Wis.) have introduced the Preserve Access to Affordable Generics Act to close the pay-for-delay loophole. The bill would make such schemes presumptively illegal and empower the FTC to challenge suspicious arrangements in federal court. The most recent version gives companies a chance to preserve certain deals if “clear and convincing evidence” proves that their “pro-competitive benefits outweigh the anti-competitive harms.” The Obama administration estimates that eliminating pay-for-delay could save the government $8.8 billion over 10 years; the Congressional Budget Office offers a dramatically more conservative savings estimate of roughly $3 billion over the same period.
The legislation should appeal to the deficit-reduction “supercommittee,” which has been tasked with identifying ways to cut the federal deficit.
By: Editorial Board Opinion, The Washington Post, October 24, 2011