If anything, the foreclosure fraud settlement has shown a breakdown in the ability of regulatory agencies to deal with the aftermath of fraudulent conduct. They simply have no ability to offer a regulatory response that’s commensurate with the behavior. If the behavior does lead to a negotiated settlement, then it comes with unsatisfying “neither admit or deny” statements that judges have continued to question:
Judge Renee Marie Bumb of United States District Court in Camden, N.J., blocked a proposed settlement on Wednesday between the Federal Trade Commission and a marketing company based in New Jersey on charges that the company and its chief executive made false and unsubstantiated claims that the use of açaí berry-based products, which they promoted, would result in rapid and substantial weight loss.
Judge Bumb ordered both the commission and the company to justify why she should approve the proposed $11.5 million settlement when the lack of an admission by the company and the executive of any wrongdoing left her with no facts with which to judge whether the negotiated deal was fair, adequate and in the public interest.
In doing so, she cited a much-discussed case involving the S.E.C. and Citigroup. Last November, Judge Jed S. Rakoff of Federal District Court in New York rejected a proposed $285 million settlement of securities fraud charges for the same reason: without an admission of guilt or agreed-upon facts there was no basis for an approval.
Judges are starting to challenge the “neither admit or deny” settlement all over the country. And the SEC’s response has been that they can’t force companies to admit wrongdoing in fraud cases, because then they would be liable for civil charges. You can see the worldview here, and the instinct for protection that the SEC has over the companies they’re supposed to regulate.
As troubling as the language is, regulators point to the significant penalties they extract in settlements. Except in many cases they don’t get the penalties at all:
Like many banks engulfed by the mortgage crisis, First National Bank of Nevada specialized in risky home loans that didn’t require borrowers to prove their incomes. When the housing bubble burst, First National got crushed in 2008 under the weight of bad loans that it could no longer resell to investors.
Last year, the Federal Deposit Insurance Corporation sued two former senior executives of the defunct bank for alleged negligence and breach of fiduciary duty, hoping to recover nearly $200 million in losses that it tied directly to those executives’ decisions. The two men denied wrongdoing and settled for $40 million.
But they didn’t pay a dime.
Instead, the federal agency – which is better known as a regulator that seizes control of failing banks and provides deposit insurance for consumers than for its prosecutorial endeavors – is still fighting in court to collect that money from Catlin Group Ltd., a Lloyd’s insurance syndicate. Catlin provided an equivalent of malpractice insurance to First National’s executives, but the insurer denied liability for the executives’ alleged mistakes.
This happens far too often, and not just to the FDIC. Settlements like the Countrywide case resulted in a tiny percentage of the anticipated result getting paid out.
This is why the foreclosure fraud settlement, explained in perhaps the best fashion by Barry Ritholtz in a must-read, is so corrosive. It exhibits the worst qualities of our regulatory state in the 21st century. And it puts a price on conduct that undermines the 300-year property system in the United States, turning fraud into a business expense. Here’s just a little from Barry:
The bigger issue is the economics of criminality. Most people who get caught committing crimes are punished. Commit a felony — if you run a bank — and your shareholders pay a monetary fine. Violating the law has merely become the banker’s cost of doing business.
Thus, the robosigning agreement has allowed the mass production of perjury. It has gone unrecognized and unpunished. It has made perjury a business expense, like travel or office furniture. The same reckless approach to giving loans to unqualified people was institutionalized, leading to another reckless approach to foreclosing homes.
We still don’t know who ordered these crimes, who is responsible for this, whether they still are in their jobs — or whether they are in a position of authority to do the same thing again.
Last, politically, the settlement reveals the corrupting influence of bank bailouts. Government is supposed to enforce laws equally and fairly. Instead, it is protecting its investments in rogue banks. They are committed to their original error and are loath to admit it. This is the reason that after a surgical accident, a new surgeon does the repair. He is objective and has nothing to hide. Conflicted governments, though, are focused on their reputation and reelection.
We have to be more concerned by the fact, given all the evidence, that the regulatory state under its current leaders cannot do better than this. Or rather, it quite easily can, but will not.




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What we need next is a law making the writing of bad checks okay.
If the banks can do it, why not consumers.
Just say that your checking balance is “marked to model”.
“… will not.”
Look, it takes long-term effort to destroy the Rule of Law.
You want “them” to just throw all that buy-partisan effort away?
“We” is now, “post-partisan” … and … “looking forward” … goin’ away!
Pulitzer for David Dayen.
The Rule of Law for everyone.
(If the first is “realized”, then there MIGHT be, possibly, some hope for the second …)
DW
“Indeed I tremble for my country when I reflect that God is just and that his justice cannot sleep forever.” Jefferson
My, you have been busy this morning, David; thank you so much. These are all such important pieces of the puzzle. I just heard that another Italian Costa cruiseship is in trouble in the Seychelles. My immediate thought was, who on God’s green earth would be venturing out in one of these when they still haven’t recovered all the bodies from the Concordia? I hope for safety for all aboard, but good grief.
Unfortunately once you are on board a ship whose amenities are dissolving in some sort of chain reaction, can you really be blamed. When we embarked all systems were shipshape, or so we believed. Stretching the analogy a bit, I would say regulations would be the lifeboats. I hope the ones on the Alegre stay at launchable rightangles to the decks. Would that ours were suitably angled also.
Not too many were on board; there was almost as many crew as passengers! Let’s make an award for journalistic excellence here at FDL and give it to DD. A pulitzer; in these times, doesn’t reflect greatness in journalism anymore;
Winners
2011 No award
No award
More details
2010 Staff The Seattle Times
For its comprehensive coverage, in print and online, of the shooting deaths of four police officers in a coffee house and the 40-hour manhunt for the suspect.
More details
2009 Staff The New York Times
For its swift and sweeping coverage of a sex scandal that resulted in the resignation of Gov. Eliot Spitzer, breaking the story on its Web site and then developing it with authoritative, rapid-fire reports.
Crime is something only the 99% do. Business is what the 1% call what they do.
When individuals rob banks they are prosecuted and incarcerated. When banks rob individuals they’re rewarded with taxpayer bail outs. Crime does pay if, like the Banksters, you’ve bought the government that’s tasked with oversight.
We should change that. Jill Stein for President.
Stein says “Obama’s populist rhetoric masks same old trickle-down policies”
Green Party presidential candidate Jill Stein said today that President Obama’s recent populist rhetoric cannot mask the reality that his White House is continuing policies that benefit big corporations and the very rich at the expense of working people.
“President Obama is touting the robo-signing deal with the big six banks, the tax deal sold as job creation, and his budget proposal as populist measures. But in fact these policies impose austerity on the 99% to pay for the luxuries of the 1%,” Stein said.
Maybe FDL should sponsor (like the Oscars) an award for the judge who annually demonstrates the greatest adherence to the rule of law. Expect the list would be quite short . . . but maybe it would morph over time into a prestigious award, stingily given. Right now, it appears there would only be two on the list (Rakoff and Bumb), though I think I remember some of the ‘foreclosure’ judges who are beginning to demand documentation.
Truth is this kind of settlement has been going on for decades. It has now reached crisis proportions. There was a time when at least some of the thieves, like in the savings and loan debacle, would get jail time. Now we have Impotent and timd regulators and leaders at all levels of government. Crony capitalism has always been here, but it really started with the bush style of wink wink. Now the pres, attorney general and that treasury asshole can’t find their collective asses with both hands and a flashllight.
We will all pay for this. The. MERS fraud will cast a long shadow since no one knows where the titles Re. Whatever you do, don’t buy a foreclosed house.
Firedoglake,
You have Alan Greyson’s ad on your website. He’s all blowing about how he’s against the screwing Americans are taking at the hands of the criminal cabal that has become the Amerikan Government.
Isn’t this guy a lawyer? Can’t SOMEONE, like HIM, file suits against is happening in our courts and the SEC to stop them from making these clearly criminal decisions in the favor of those who have bought them? Greyson made a mark when he spoke about the Republtraitors Helth Care plan, but let’s go man, it ain’t all about beggin for money. Get your ass out there in the street and call them out every day with a bull horn. You too Jane!
It must be nice sittin up there in those offices with your airconditioned offices and all, especially when you throw in the salaries and perks.
Just a few step below the 1%s Huh?
Get your asses out in the street and lead the revolution. All those dirt hippies who took the risks and beatings from the Gestapo are the true heroes. So far, the Gestapo has beaten the asses of everyone of them, but GOD BLESS THE DIRTY HIPPIE PATRIOTS- EVERY ONE OF THEM!
Isn’t there a court in this land that can stop this or is it going to take guns?
I’m so goddamned sick of what is happening in this country that when it starts they can look for me across the barricades! America needs for it to start seriously and they need to be assulted verbally in the streets EVERY DAY!
Start the AMERICAN SPRING GREYSON! I’ll bet Reverend AL will join you and so will ALL PATRIOTIC AMERICANS!
Throw OFF the TYRANTS it’s YOUR/OUR DUTY
Oh my goodness, DW, “The Rule of Law for everyone”? Too much work, too mired in legacy, too inefficient! It’s either the barracks or the bazaar for everyone but the philosopher-kings.
No just republic ever survives, my dear eutopian.
Here Another Question for you FiredogLake?
WHY am I being tracked by commercial websites when I log on here.
Is there money to be made tracking the radical hippies too?
Even though I DON”T have any money to spend on Greyson’s campaign.
I just want to let your membership know that there’s money in tracking you on the net!
So much for ideals…….
You are being tracked everywhere. So am I and everyone else. Data mining and collection is number one industry right now. They know what you buy and how long you stand in front of a display at the market. FDL is a good place to be tracked at if you are desirous of ever living in a free society. (well almost free)
Yes tracking sucks. It is corporate spying and I have complained to no avail. Some cookie is planted on hard drive and stuff I searched comes on the adds here..probably just for me. Come on Jane give us a fix?
She and Rocky Anderson should join forces and present a united front to try and unseat the Obamaligarchy. The PTB may be able to disappear one of them, but not both.
Excellent continued coverage of this horrible miscarriage of justice.
THANKS!!!
It is verrrry disturbing however.
It’s plausible that Alan Grayson’s public personae is an act. He aired an attack ad against his opponent, during his re-election bid, that smeared him by taking his words out of context thereby reversing their meaning. When it came to light, it may have cost him re-election, and it was uncalled for. Grayson has more money than integrity and his words may belie his intentions. Don’t be so quick to trust him.
It is sad that the public space has become so convoluted and complex that it creates a paranoia in people. Who can one trust nowadays? It’s a sad commentary that we can trust no one! I am seriously considering taking my passport and vegabonding into the lesser areas of the world in search of living experience meeting other people around the world in friendship until my bones return to the stars from whence they came.
I long for simple pleasures like simple food, community and companionship and warmth as opposed to this computer electronic driven insanity that is called civilization. I’m coming to the view that this rat race is not worth the effort!
You don’t have to log on to have a dozen or more cookies set, just visiting will set them.
If not for that tracking, a FDL membership would probably cost around $3,000/yr.
Have you asked here?
Yea, All those air-conditioned offices and salaries and travel and…and dinners….and….All to stand up for a few dirty hippies out in the street.
Somehow it doesn’t ring true as an enemy of the status quo.
Does it to you?
I would think they would be more effective if they were calling from the barricades with a bullhorn!
Patriots need to storm the Gestap…er Police stations and courthouses and commit open crimes like lighting joints and demanding arrest over and over and over again all day every day and every night until they get tired and just send you home and then demand court appearances for EVERY Violation and overwhelm these rotten NAZI LIKE BASTARDS!
Let’s take America away from the criminals! If we have 20 million people overwhelm these criminals, maybe we can force them to throw open the doors of their private prisons and forgive the criminal foreclosures they have committed against millions of Americans and put the criminal cabal bankers into the prisons where they belong and make them and their families destitute. Turn the world on it head, which is what we need!
Take freedom back. The Egyptians and the Syrians are showing what a bunch of gutless pussies Americans are. You only get to live once, why do it as a slave?
I genuinely miss Jane Hamsher’s brilliant writing.
That’s an unfortunate turn of phrase, that euphemism for cunt, even if many women who should know better also employ it unthinkingly.
I genuinely miss Jane Hamsher’s excellent writing here.
That’s an unfortunate turn of phrase to use, that euphemism, even if many women who should know better also employ it unthinkingly.
(Waves to Mod or bot)
you mistake a feature for a bug.