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CONGRESS OF THE UNITED STATES re: Senator Elizabeth Warren (D-MA) and Rep. Elijah E. Cummings (D-MD) April 10, 2013 letter to Federal Reserve Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry

CONGRESS OF THE UNITED STATES re: Senator Elizabeth Warren (D-MA) and Rep. Elijah E. Cummings (D-MD) April 10, 2013 letter to Federal Reserve Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry

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Published by Barry Fagan Esq.
Fed Argues that Mortgage Abuses are Trade Secrets, Meaning Institutionalized Fraud

Warren and Cummings have been asking the OCC and Fed for some time for more information about what happened in the foreclosure reviews. Out of fourteen information requests they made in a January letter, they got only one question answered in full, and mere partial responses to three other questions. At the meeting yesterday, Federal Reserve staff argued that the documents relating to widespread legal violations are the “trade secrets” of mortgage servicing companies. In addition, staff from the Office of the Comptroller of the Currency (OCC) argued that these documents should be withheld from Members of Congress because producing them could be interpreted as a waiver of their authority to prevent disclosure to the public of confidential supervisory bank examination information.Now, of course, this argument is revealing in a lot of other ways. The Fed has also just admitted it thinks it is more important to protect bank knowledge of how to break the law than expose the information. So the Fed has also made explicit that it wants to preserve banks’ ability to rip off people. So the Fed’s official policy is bank profits trump the law. Not that we didn’t know that, but it has now been stated in a baldfaced manner.

The OCC’s position, that they need to preserve confidential bank examination information, is equally ridiculous (the letter gives a long-form debunking). Warren and Cummings noted,

You may protect against such a waiver by including standard language in a cover letter explaining that providing documents to Members of Congress, even if normally not disclosed to the public because of their proprietary or confidential nature, does not constitute a waiver.

But it’s doubtful that the information at hand is “bank examination information”. The reason for keeping bank examination results confidential is to prevent bank runs. Mortgage servicing units are not banks. In fact, the OCC said repeatedly when it was pilloried for its failure to supervise servciers that didn’t have much in the way of formal authority over them. It wasn’t acting as a bank examiner of servicing units for the period that was the focus of the IFR, 2009 and 2010. Given the poor control over information during the IFR (for instance, at Bank of America, the army of temps who performed the project didn’t sign enforceable confidentiality agreements), and the fact that lots of relevant information (investor reports, court documents, including the affidavits used for the fraudulent fees) are public records, the OCC argument isn’t credible.

This exchange also confirms something the public knows all too well: the regulators are in the business of protecting the banks, and only secondarily in enforcing the law. And until that changes, it is the safety and soundness of the population that is at risk.

Fed Argues that Mortgage Abuses are Trade Secrets, Meaning Institutionalized Fraud

Warren and Cummings have been asking the OCC and Fed for some time for more information about what happened in the foreclosure reviews. Out of fourteen information requests they made in a January letter, they got only one question answered in full, and mere partial responses to three other questions. At the meeting yesterday, Federal Reserve staff argued that the documents relating to widespread legal violations are the “trade secrets” of mortgage servicing companies. In addition, staff from the Office of the Comptroller of the Currency (OCC) argued that these documents should be withheld from Members of Congress because producing them could be interpreted as a waiver of their authority to prevent disclosure to the public of confidential supervisory bank examination information.Now, of course, this argument is revealing in a lot of other ways. The Fed has also just admitted it thinks it is more important to protect bank knowledge of how to break the law than expose the information. So the Fed has also made explicit that it wants to preserve banks’ ability to rip off people. So the Fed’s official policy is bank profits trump the law. Not that we didn’t know that, but it has now been stated in a baldfaced manner.

The OCC’s position, that they need to preserve confidential bank examination information, is equally ridiculous (the letter gives a long-form debunking). Warren and Cummings noted,

You may protect against such a waiver by including standard language in a cover letter explaining that providing documents to Members of Congress, even if normally not disclosed to the public because of their proprietary or confidential nature, does not constitute a waiver.

But it’s doubtful that the information at hand is “bank examination information”. The reason for keeping bank examination results confidential is to prevent bank runs. Mortgage servicing units are not banks. In fact, the OCC said repeatedly when it was pilloried for its failure to supervise servciers that didn’t have much in the way of formal authority over them. It wasn’t acting as a bank examiner of servicing units for the period that was the focus of the IFR, 2009 and 2010. Given the poor control over information during the IFR (for instance, at Bank of America, the army of temps who performed the project didn’t sign enforceable confidentiality agreements), and the fact that lots of relevant information (investor reports, court documents, including the affidavits used for the fraudulent fees) are public records, the OCC argument isn’t credible.

This exchange also confirms something the public knows all too well: the regulators are in the business of protecting the banks, and only secondarily in enforcing the law. And until that changes, it is the safety and soundness of the population that is at risk.

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Categories:Types, Business/Law
Published by: Barry Fagan Esq. on Apr 11, 2013
Copyright:Attribution Non-commercial

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04/21/2013

 
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