Sleepless Nights on Wall Street, Nightmares on Main Street

The top bankers that were called to testify before the independent Financial Inquiry Crisis Commission in Washington today touched on the drama of the September 2008 financial crisis. They complained of nervous anxiety and sleepless nights. They didn't apologize for a thing, but they did -- to a man -- express their deep appreciation to the American taxpayer for saving their hides.

So how are the big banks treating those taxpayers these days? Almost every banker touted his firm's voluntary housing loan modification efforts to help families facing foreclosure. Jamie Dimon of JP Morgan Chase, for instance, cited 570,000 new trial loan modifications and 112,000 permanent modifications.

In a day's worth of testimony, no one took issue with this happy scenario presented by the grateful bankers until Julia Gordon, a housing expert from the Center for Responsive Lending, took the stand and dove straight in.

"The bankers touched upon their sleepless nights at the height of the crisis. Today, 6.5 million American are suffering sleepless nights, every night, wondering if they will have a home tomorrow." And it is not over: "our data shows that by the end of 2014, 13 million Americans will lose their homes," she said. Gordon testified that the banks were failing to modify loans at any meaningful rate and that they pursued modification procedures in parallel with foreclosure procedures. The result is that hopeful homeowners are often surprised at the door by sheriff's deputies ready to kick them to the curb.

Gordon continued: "The most tragic aspect of the subprime crisis that triggered the larger financial crisis is that it was utterly unnecessary. The only reason for these products to have been mass-marketed to consumers was for Wall Street and mortgage companies to make quick money by selling (and flipping) large numbers of loans with minimal underwriting. Never have so many toxic loan products been aggressively marketed on such a large scale with such loose lending rules."

Fraud is at the heart of the issue. A study for the Wall Street Journal found that, of the subprime loans originated in 2006 that were packaged into securities and sold to investors, 61 percent "went to people with credit scores high enough to often qualify for conventional [i.e., prime] loans with far better terms." The result? The asset base of entire neighborhoods was "wiped out" according to Gordon, hitting Latino and African American communities the hardest.

While some of the bankers admitted to making mistakes, for instance, Lloyd Blankfein of Goldman Sach's bravely admitted to contributing to "froth" in the market, none of the bankers owned up to Wall Street's real role in turning the American Dream into the American Nightmare.

"Consumers were not asking for these loans, Wall Street was asking for these loans. They told brokers that they would pay more for "no doc" loans, and the brokers turned around and push marketed them to consumers," said Gordon.

Her recommendations? The big banks should not be permitted to initiate foreclosures while servicers evaluate eligibility for loan modifications. Homeowners should be allowed to ask a judge to modify their first home in bankruptcy proceedings, in the same manner in which the wealthy can have their debt on vacation homes and yachts modified. Finally, Congress needs to pass a strong and independent Consumer Financial Protection Agency to protect consumers suffering from fraud and abuse in its initial stages before the practice is able to bring down the world's economy.

To access the day's testimony or to send questions for commission members to ask of the people testifying tomorrow, go to the Financial Crisis Inquiry Commission website.

Mary Bottari

Mary Bottari is a reporter for the Center for Media and Democracy (CMD). She helped launch CMD's award-winning ALEC Exposed investigation and is a two-time recipient of the Sidney Prize for public interest journalism from the Sidney Hillman Foundation.

Comments

Well, it is nice that the International Bankers who own us slaves took this opportunity to thank us for 'loaning' them money in their time of need. Of course, it wasn't our money that was loaned. Our money was spent a long time ago - my entire life's value in terms of taxes paid (and yet to be paid) perhaps went to pour some concrete in a Kansas missile silo. Or, maybe it's in the toilets onboard a nuclear submarine. Perhaps it went to fuel Nixon's infamous trip to China. But most likely, the taxation on my sweat and effort went to pay a terribly miniscule portion of the interest owed on the national debt - debt from the 1960's or '70's. That I wasn't born until 1968 has nothing to do with it. I feel better than my 2 boys will, though. While still in single-digits age wise, their slave labor owed to the Federal Government will likely go towards paying debt accumulated in the 1980's. Perhaps while I was in high school. My grandchildren's efforts will go to pay 1990's era debt. Great grandkids, perhaps their sweat will go to pay off a portion of Nancy Pelosi's aircraft that shuttles her and her friends back and forth weekly across the continent. But soon, I think, it will no longer matter. We can't sink much further into debt, can we? The well must run dry sometime, right? I guess it is up to our friendly Federal Reserve. The private banksters who REALLY control all things money in this country and the world. As long as they are willing to let our politicians play this game of musical chairs with the American public striving mightily to construct more and more chairs for the fatasses, I guess we can continue piling on debt on top of debt. Right???

The bailout prevented banks willing to work on modifications before foreclosing. Nearly every home with Bank Of America that is foreclosed on is insured. So, that is why the banks want to quickly foreclose. They get the insurance money in full for the entire amount due, and then they get the home as PURE FREE BONUS for whatever they sell the home for in the future. Bank of America has been holding a stock pile of foreclosures and not releasing them into the public in Nevada, Arizona, and California - this is the places that can be proven, I don't know of other states where I can prove this with facts but believe they are doing this everywhere. They immediately put HUD homes back on the market along with fixer uppers and most homes appraised with low value or in a subdivision with too many other homes in dire straits. They hang on to the many homes that they put into their system proving to hold more value than the others. They will then turn around and sell those when the time is better. They give the homeowner's cash (up to $5000.00) for the house keys hoping you keep the home in good condition so that they can sell it for even more and make even more PURE PROFIT. This is profit on top of profit. The insurance pays them and then they sell the home and get paid again. ONLY THE RICH can get their vacation homes yachts and Rolls Royces loans modified by a judge!!!! WHY THE HECK CAN'T THE AVERAGE AND POOR MAN GET THE ROOF OVER THEIR HEADS MODIFIED BY A JUDGE???? Well let me answer that for you. GREEDY POLITICIANS, BANKERS, INVESTORS, AND WALL STREET. Wall Street pays politicians under the table to let things go and let things happen. Bankers definitely have been paying politicians for years and years to let them get away with murder. They say they can't let judges modify owner occupied homes because that will force them to raise interest rates when they loan money???? Who the hell can get a loan these days. I can speak about that because for over 20 years my husband and I have had excellent credit and I mean in the 800's. We both owned profitable small businesses, paid our taxes, did everything right. Now, all of our credit cards have been canceled or limits cut to 1/4 of what they originally were and no bank will loan us any money for our business. So, getting back to the banks lies about they will have to raise interest rates and it will be harder for people to get loans -- Hello????!!!! We already can't get loans. Banks got bailed out by the government - POLITICIANS AND THEIR FRIENDS AND FAMILY WHO HAVE BIG MONEY VESTED WITH THE BANKS PLAIN AND SIMPLE SIDE WITH THE BANKS AND WILL DO ANYTHING IN THEIR POWER TO HELP THEM BECAUSE HELLO??? IT IS REALLY HELPING THEMSELVES AND THEIR OWN POCKETBOOKS. Main Street needs to wake up to the truth like our leaders in the American Revolution did. They knew in their hearts what was really going on and stood up for what they believed was fair for every one. I call for our fellow Americans on Main Street and below to stand together and let's have a BOSTON TEA PARTY NOW!!!!!