Manny Mondays - The Whitewash Continues

Morning all! So after the farce that was the FCIC findings basically amounted to everyone being guilty of something that led to the meltdown, which basically equates to nobody being truly responsible (or accountable) for anything, it seems the whitewash of real causes and culprits of the financial and economic meltdown continues unabated. Sadly, now that the equity markets are up over 90% off the March '09 lows and the economy is in recovery, not many people seem to care. The wonders of a short collective memory never cease.

The first article appeared late last week in the Huffington Post: Fed Report Finds No Wrongful Foreclosures By Banks, where, in findings that were highly Onion-worthy, the Fed found that no abuses occurred by the mortgage servicers during the foreclosure process. No, that is not a typo, they found not a single abuse, but that is mainly because their definition of the word "abuse" was conveniently and predictably narrowly defined:

During a public meeting attended by Fed chairman Ben Bernanke, consumer advocates on the panel criticized the central bank's examiners for narrowly defining what constitutes a "wrongful foreclosure." At least one member of the panel, comprised of consumer finance experts not employed by the Fed, voiced concerns that the public would not take the Fed's findings of improper practices seriously, since the wide-ranging review did not find a single homeowner who was wrongfully foreclosed upon.

Members of the panel were briefed on the report's findings on Wednesday by Fed staff during a closed-door meeting. It appears the results were not supposed to have been disclosed Thursday.

The Fed's findings seem to support claims from the banking industry, which has admitted to sloppy practices but has maintained that the homeowners whose homes have been repossessed were substantially behind on their payments.

The second one appeared in the Sunday NY Times: A Swift Deal May Not Be a Sound One, written by Gretchen Morgensen, where, it seems the state attorneys general are curiously in a rush to settle with the banks and to, in effect, sweep the abuses the Fed couldn't find under the proverbial rug. The wheels of predation, I mean, commerce, must continue under all circumstances, it seems. After all, there's a stock market rally to support.

While some might argue that a rapid approach will help borrowers, it is apt to benefit the banks far more. Hurrying to strike a deal means less time to devote to understanding how pernicious the foreclosure practices were at the nation’s largest institutions. How can you determine appropriate penalties for troubling practices when you haven’t conducted a full-fledged investigation?

Remember that the attorneys general who are participating in this settlement process have been a coalition only since October. Two people who have been briefed on the discussions, but who asked for anonymity because the deal was not final, told me last week that no witnesses had been interviewed and that the coalition had sent out just one request for documents — and it has not yet been answered.

And, yet, along comes a 27-page outline of remedies that the banks would have to abide by in their loan servicing and foreclosure businesses. Talk has also circulated that the banks would have to cough up $20 billion to close the deal, though there are no figures in the outline.

The final piece that I found interesting was over at Zero Hedge, where, it seems the SEC is prepared to not hold anyone responsible at Lehman for the Repo 105 accounting machinations, likely because that would similar inquiries would need to be made with TBTF titans, Citi and BofA, and it's clear that nothing can be done to call into question their "turnaround" stories. Apparently the different layers of the rotten onion must remain sealed. Go read the whole post here: Letting No Disaster Go To Waste, SEC Prepares To Let Lehman Executives Walk For Repo 105 Fraud.

All of this makes me wonder if a Mr. Jeffrey Skilling is sitting in a remote MN hinterlands cell lamenting being just a tad early in his machinations and not causing a "big enough" crisis. Otherwise, he may likely be not only be a free man, but still working in a big, powerful executive job somewhere. I guess this further proves the old cliche about the importance of timing.