Donald Trump Has An Enormous And Very Dangerous Wall Street Blind Spot

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

The biggest disappointment regarding Donald Trump since being elected President has been his total embrace of dangerous Wall Street thieves. As it is currently structured and incentivized, the financial services industry represents one of the most destructive and least beneficial forces within the U.S. economy. It is essentially a parasitic industry.

Unfortunately, Trump didn’t merely pick one or two competent finance guys to be in charge of finance-related jobs. Rather, he decided to surround himself with some of the worst of the worst (see links at the end) within an industry that often operates like a criminal syndicate. Treasury Secretary pick Steven Mnuchin is one of these people, and I believe this choice represents the single biggest mistake Trump has made as President-elect.

A very large percentage of the American public (including myself), remain irate at the complete lack of any justice served with regard to finance criminals in the aftermath of the economic collapse of 2008/09. When it comes to greedy, unethical behavior in the wake of that tragic period, Steve Mnuchin is in a class of his own. To appoint such a toxic financial oligarch to Treasury Secretary is a serious slap in the face to all American citizens.

Journalist David Dayen accurately described Mnuchin as the “Anti-Populist from Hell” in an excellent article published back in May of last year. Yesterday, he published what can be seen as a followup to that piece, in which he details the findings of a leaked memo from top California prosecutors who were looking to bring forward a case against OneWest for over a thousand legal violations they discovered. Inexplicably, the case never went forward, and the woman who had been in charge of the investigation, state attorney general Kamala Harris, has now been elected to the U.S. Senate.

The following is a tale of not just seemingly rampant illegal activity at the financial institution run by Steve Mnuchin, but of an attorney general’s office who couldn’t be bothered to do its job and protect the vulnerable residents of the state of California.

What follows are excerpts from the piece published at The Intercept, Treasury Nominee Steve Mnuchin’s Bank Accused of “Widespread Misconduct” in Leaked Memo:

Onewest Bank, which Donald Trump’s nominee for treasury secretary, Steven Mnuchin, ran from 2009 to 2015, repeatedly broke California’s foreclosure laws during that period, according to a previously undisclosed 2013 memo from top prosecutors in the state attorney general’s office.

The memo obtained by The Intercept alleges that OneWest rushed delinquent homeowners out of their homes by violating notice and waiting period statutes, illegally backdated key documents, and effectively gamed foreclosure auctions.

In the memo, the leaders of the state attorney general’s Consumer Law Section said they had “uncovered evidence suggestive of widespread misconduct” in a yearlong investigation. In a detailed 22-page request, they identified over a thousand legal violations in the small subsection of OneWest loans they were able to examine, and they recommended that Attorney General Kamala Harris file a civil enforcement action against the Pasadena-based bank. They even wrote up a sample legal complaint, seeking injunctive relief and millions of dollars in penalties.
But Harris’s office, without any explanation, declined to prosecute the case.

Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, warned: “Given Mr. Mnuchin’s history of profiting off the victims of predatory lending, I look forward to asking him how his Treasury Department would work for Americans who are still waiting for the economic recovery to show up in their communities.”

The consistent violations of California foreclosure processes outlined in the memo would indicate that Mnuchin’s bank didn’t merely act callously, but did so with blatant disregard for the law.

According to the memo, OneWest also obstructed the investigation by ordering third parties to refuse to comply with state subpoenas.

The memo also raises questions about then-California Attorney General Kamala Harris, who was sworn in as a U.S. senator on Tuesday, and who will soon have to vote on Mnuchin’s appointment.

Why did her office close the case, deciding not to “conduct a full investigation of a national bank’s misconduct and provide a public accounting of what happened,” as her own investigators had urged?

Great questions. Also interesting how she was rewarded for flouting the law with a Senate seat.

State and federal law enforcement have been severely criticized for failing to hold accountable those responsible for the financial crisis and its aftermath. The OneWest case provides another example, and this time, the failure to prosecute could help the nation’s next treasury secretary get confirmed.

The relatively few additional files prosecutors were able to obtain revealed more evidence of backdating. The Consumer Law Section reviewed 913 documents from Quality Loan Service Corp., a trustee that worked with OneWest; 909 of them were backdated. The LPS files included backdated documents as well. Investigators determined this because the document metadata showing the dates of execution showed later dates than the ones stamped on the documents themselves.

Investigators surmised that OneWest listed trustees on notices of default before formally executing the SOTs, then backdated the SOTs to make it look like those trustees were already in place at the time the notice of default was issued.

Had OneWest put the correct date on the SOTs, they would have had to file new notices of default, restarting the 90-day clock and delaying the foreclosure.

“That’s consistent with a pattern of creating whatever documents that appear necessary at the time that they’re created to grease the wheels of the foreclosure machine,” said Mark Zanides, a former federal prosecutor who has represented homeowners in California.

CONSUMER LAW SECTION ATTORNEYS recommended “that the attorney general authorize us to file a civil enforcement action against OneWest.” Two months later, they were told that the office would not move forward with the complaint. OneWest representatives were not even brought in for a meeting to discuss the matter.

So why didn’t Kamala Harris leap at the chance to take on a bank that her staff said was illegally rushing Californians out of their homes? Why did she reject a case that her office had already spent significant resources on during a year of line-level investigation?

Kristin Ford, communications director at the attorney general’s office, did not respond to a detailed request for comment. Without an official explanation, we can only speculate why Harris passed up the opportunity. Perhaps she judged the case too difficult, or not a high enough priority, or not having enough of a human interest. Or maybe it was something else.

Harris has been criticized for a lack of vigor in prosecuting foreclosure fraud before. She set up a Mortgage Fraud Strike Force in 2011, dedicated to “protect innocent homeowners and bring justice to those who defraud them.” But despite hundreds of complaints of loan modification fraud — a primary target identified by the office — it only prosecuted 10 cases in the first three years.

The Intercept asked Harris’s office for a breakdown of cases initiated and prosecuted by the Consumer Law Section during her tenure. They have not yet provided them.

One of the supervisors involved in the OneWest case, Supervising Deputy Attorney General Benjamin Diehl, left the office in November 2013 to join Stroock Stroock & Lavan, a corporate law firm that represents Bank of America, JPMorgan Chase, and Citigroup in cases against consumers, regulatory agencies and state attorneys general. Emails indicate that Diehl arranged private meetings with Stroock partners six months before his hiring, while he still worked for the attorney general. Stroock would not make Diehl available for comment.

So dirty.

Harris’s prodigious fundraising also raises questions about how attentive she is to the needs of campaign contributors. Prior to signing on with Trump, Mnuchin donated to members of both parties. He gave $2,000 to Harris’ Senate campaign in February 2016. Among the investors in OneWest Bank was major Democratic donor George Soros, who maxed out to Harris’ campaign in 2015.

OneWest may also have violated a loss share agreement signed with the FDIC upon purchasing assets from the failed lender IndyMac. That agreement, which backstopped OneWest losses on foreclosures, committed OneWest to make good faith options to try to avoid them. Violations that sped up foreclosures could indicate that the bank didn’t make such an effort.

Senate Democrats have already attacked Mnuchin over OneWest’s foreclosure practices, even setting up a website inviting foreclosure victims to tell their stories. One of those victims, Teena Colebrook, voted for Donald Trump but lost her faith in that decision after the Mnuchin pick. In an interview, Colebrook alleged discrepancies on her substitution of trustee, similar to what was described in the package memo.

“It has to get out why this man should not be put in charge of Treasury,” said Colebrook. “Nobody minds a billionaire, but not one feeding off people’s misery.”

While Mnuchin is clearly one of the worst Wall Streeters Trump has decided to surround himself with, he’s far from the only one. Indeed, reports out earlier today indicate that his choice for head of the SEC has deep ties to America’s largest financial firms.

The Wall Street Journal reports:

WASHINGTON—Wall Street lawyer Jay Clayton has emerged as the leading candidate to be chairman of the Securities and Exchange Commission and could be announced as the nominee as soon as Wednesday, according to an official working with the transition team of President-elect Donald Trump.

Mr. Clayton, whose clients have included Goldman Sachs Group Inc. and Barclays Capital Inc., would succeed SEC Chairman Mary Jo White, another lawyer with a history of representing Wall Street banks before becoming a regulator. Mr. Clayton, who met with Mr. Trump on Dec. 22, is a partner at Sullivan & Cromwell LLP, where he also worked on the 2014 initial public offering of Alibaba Group Holding Ltd., according to Sullivan’s website.

Mr. Clayton would become the latest Trump appointee with longstanding Wall Street ties, joining former Goldman executive Steven Mnuchin, Mr. Trump’s choice for Treasury secretary; former Goldman President Gary Cohn, who will run the National Economic Council; and private-equity investor Wilbur Ross, the pick to head the Commerce Department.

Mr. Clayton represented Goldman when it received a $5 billion investment from billionaire Warren Buffett’s company during the peak of the credit crisis in September 2008, according to his bio on Sullivan’s website. He’s also represented Goldman in connection with other investments and acquisitions, according to the law firm. Sullivan is a key outside legal adviser for Goldman and is more closely associated with Wall Street than perhaps any other law firm.

Mr. Clayton has a wide-ranging corporate practice spanning mergers and acquisitions, IPOs, corporate governance, and investment advice for high-net-worth families. Other matters that Mr. Clayton has worked on include advising Morgan Stanley on the sale of its physical oil-trading division and Bear Stearns on its sale to J.P. Morgan Chase & Co.—two deals shaped heavily by the financial crisis and its aftermath.

Mr. Clayton would take over the SEC at a time when congressional Republicans are pressuring the agency to loosen fundraising rules for smaller public companies, lighten its oversight of private-equity firms, and repeal executive-compensation rules opposed by corporations.

Unfortunately, that’s not the only way Congressional Republicans are looking to help Wall Street solidify and grow its “heads they win, tails taxpayers” lose casino. As Reuters reported earlier today:

Big U.S. banks are set on getting Congress this year to loosen or eliminate the Volcker rule against using depositors’ funds for speculative bets on the bank’s own account, a test case of whether Wall Street can flex its muscle in Washington again.

In interviews over the past several weeks, half a dozen industry lobbyists said they began meeting with legislative staff after the U.S. election in November to discuss matters including a rollback of Volcker, part of the Dodd-Frank financial reform that Congress enacted after the financial crisis and bank bailouts.

Banks now see opportunities to unravel reforms under President-Elect Donald Trump’s administration and the incoming Republican-led Congress, which appear more business-friendly, lobbyists said.

As the industry begins a fresh lobbying push, watchdogs say they are worried about big banks going back to a casino-like past.

“Wall Street is salivating at their reversal of fortune,” said Dennis Kelleher, CEO of Better Markets, which pushes for tighter financial regulation. “If you get to keep profits and stick taxpayers with the losses, why not?”

Changing the rule through Congress would require 60 votes in the Senate, including support from at least eight Democrats. Lobbyists say they intend to court business-friendly Democrats like Joe Manchin in West Virginia, Heidi Heitkamp in North Dakota, Joe Donnelly in Indiana, Jon Tester in Montana, and possibly Angus King in Maine.

Donald Trump’s embrace of Wall Street is a huge red flag, and will present an enormous obstacle to any hope he may have concerning a fundamental transformation of the U.S. economy away from rent-seeking and corruption. In other words, you can’t drain the swamp without reining in the financial sector. Trump doesn’t seem to understand this, or if he does understand it, he doesn’t seem to care.

If you enjoyed this post, and want to contribute to genuine, independent media, consider visiting our Support Page.

For related articles, see:

There Will Be Swamp – Steve Mnuchin Confirms Treasury Secretary Nod

Draining the Swamp? Wall Street is Already Loving Donald Trump

Interview with The Corbett Report – Trump Fills the Swamp With Steven Mnuchin

Trump Fills the Swamp with Elaine Chao (Mitch McConnell’s Wife) for Transportation Secretary

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  • Josh Stern

    This is a strong article in its category because it looks concretely for some of the meaty substance in the allegations of profiteering & criminal conspiracy related to home mortage foreclosures. Specifically, banks make money processing & selling home loans, in general. The surface story, largely true, is that they lose a lot of money rather than making money in individual cases of home foreclosure because the foreclosure process itself has a bunch of costs involved, they don’t get the rest of the loan repaid, and then the ultimate selling price of the forceclosed home, especially in a housing crisis is almost always much less than both the loan value and the true market value. Analysts commonly use terms like taking a “50% haircut on those loans.” If housing prices are flat, then the surface story is that the banks has an incentive to keep the people in the home as long as possible if they are paying something on the loan, because getting something is better than getting nothing…

    Against that background, the investigative question arises: Why rush the deliquent loan holders out, & even conspire to break the law in pursuit of that, if the effect is to ensure getting nothing more on that loan instead of something?? One possibility is a worry about further decline in selling prices in a crisis. A more powerful, and sneaky possibility is that the auctions of the homes are not really public, but rather below market cost transfers to covert financial partners of the selling institution. In that case, the logic reverses, and it is beneficial to cheat and rush the deliquent homeowners out of the property!

    “The memo obtained
    by The Intercept alleges that OneWest rushed delinquent homeowners out
    of their homes by violating notice and waiting period statutes,
    illegally backdated key documents, and effectively gamed foreclosure

    That part about gaming the auctions would be the real key to explaining the profit motive in this alleged criminal conspiracy!


      Dude, old news, and nobody went to jail…. Keywords; clouded title and MERS. What you are referring to is simply government incentive to foreclose, aka TARP under the cover of HAMP. It’s a symptom from capital expense limitations and uncle sam backing the whole show with FDIC insured GSE loans, primary from FNMA. There is a lot of meat in the argument to audit the fed and wind down FNMA. As a real estate appraiser, I know all about it. People ask me how they may beat the system and make best lending decisions and borrowing decisions alike. Well, you don’t own the home until the very last payment is made. Homeownership in America is a misnomer because we are currently at record low levels of home ownership than any other time in American history, even with per capita adjustments over time. Basically the carpetbaggers are international these days and constantly pilfer our markets. It’s illegal for foreign speculators to buy lands in other countries, but not the USA. You know what I think it was Jefferson who said; Central banking institutions are more dangerous to our liberties than standing armies. Thanks for reading. X

      • Josh Stern

        Re: “you don’t own the home until the very last payment is made.”

        In foreclosure, the homeowner still owns whatever their current amount of equity in the home is:

        An honest loan holder has a lot of costs related to foreclosure & re-sell & would normally lose money by forcing unnecessary foreclosures. The criminal incentive to unnecessary/premature forced foreclosure has to come from some other factor, like gaming the re-sell or some kind of real-estate market timing.

        Note that the above issues are completely different from the broader problem of writing unsound loans that are likely to default, disguising their unsoundness, and then selling the loan to another patsy – in that case the homeowner and the patsy down the line (who may be foreclosing) are both losers, while only the original loan broker is the winner.

  • slorter

    look I’m not holding my breath with Trump! I am assuming he will be a dismal failure like the rest let’s wait and see!

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  • diogenes

    So Trump turns out to be another puppet of the Wall Street oligarchy — disguised as a “maverick outsider populist”! His SEC appointment of a Sullivan & Cromwell operative gives the whole game entirely away, to anyone who knows the game. There isn’t any Wall Street law firm more inside thatn S&C. The Dulles’s old firm! The firm that wrote JP Morgan’s corporate consolidations — US Steel! Talk about a steal. Fooled you again! Chumps!

    What a surprise!

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    Per the other article content like mortgage fraud task force……. Well…… The various state AG’s formed that repayment coalition and did get paltry 2k checks to many persons prior to re adjustment rules and such, but what a waste of time. The AG’s had to form task forces to oversee internal policing of major lenders. Needless to say, but needs to be said for the uninformed reader; The cost to pursue lenders was prohibitive and that’s why the 50 state AG coalition only succeeded as a group, and succeeded poorly at that. But let me throw down a pearl of wisdom; Financial education in the USA is one of the weakest in the world. People with dirt in their pocket understand more about thrift and wise spending than many of the pampered amerizombies out there. Nobody made all those ‘poor homeowners’ accept money from lenders, they accepted and sought out those loans willingly. It is a very poor decision to leverage your home to the bank, but people keep on doing that none the less. It is typically a poor decision to reset your amortized term unless you are flipping a 30 to a 15 or something and saving both time and money. Cash equivalency over the amortized term, comparing prospective vs current rates…. If you don’t understand how to figure that, you’ve got no business seeking refinances of your home. If you can’t spot the fish, the fish is you. So you know, nobody went to jail because debt is ultimately the responsibility of the person whom accepts debt, and not the person whom loans out the money. If you take a bank loan, you gotta pay that shit back. So next time someone expounds on homeowners losing their home, think of what an absurd statement that is. If they were actual homeowners, they would not have owed anything to the bank. The only way to beat the lending system is to own your home completely and not participate in borrowing schemes. Schemes is probably the best way to describe them, and nobody went to jail because the mandate to make sub primes and even now to expand qualification peramiters comes from the top. A little known factoid is that the federal government through FDIC and FNMA both coerced insured lenders to make subprimes or they would have faced fines for not doing so. It was a big set up from the start in a desperate political attempt to bolster the gdp. Smart buyers are so few and far between, nothing sort of picking up financial literacy for youth with solve the problem of a willingly indebted America. Enter Ron Paul. Follow with Trump? Boy, hard to say, but as long as he builds the wall, we’ll have made an important first step to regaining national sovereignty. The world stage sounds great and all but is a very poor concept for financial security for us Americans living in the USA. God, Guns, Guts, I think I’ll keep all three, thank you very much.