Goldman Sachs conveniently places itself outside the world described above as they managed to get rid of their loans before the meltdown occurred, but they still participated in actions that made foreclosures a certainly and urban blight a consequence. Read the memorandum from Levin and Coburn of the Senate Permanent Subcommittee on Investigations, Exhibit #1a page 5 on [after intro page 17]. There are two examples there of Goldman Sachs as "an active participant in the mortgage market, particularly in the area of securitization."
Janet Tavakoli illustrates the problems that evolved from foreclosures and securitization, including the death of communities, because of the actions of banks like Goldman Sachs and servicing companies like Litton Loan Servicing which GS once owned.
Why Some Housing Prices Are Still Falling and Subprime Loans Are Still Sliding
By Janet Tavakoli - Huffpost Business
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"Countrywide Broke the Law"
It would be easy to turn away from this and blame the borrowers. Some of the borrowers were absentee landlords who knew what they were doing. Some borrowers overreached. But in many cases, people were victimized by predatory lenders. For example, a complaint of alleged fraud against Goldman Sachs, includes allegations of fraudulent practices by Countrywide, now owned by Bank of America. A former Countrywide employee stated that approximately 90% of all "liars' loans, loans that allowed reduced documentation about borrowers' income and assets, sold out of a Chicago office had inflated incomes.
The borrowers weren't inflating the income. Countrywide routinely doubled the amount of the potential borrower's income to qualify borrowers for loans they couldn't afford so that Countrywide and its mortgage brokers could continue to earn fees and commissions. Prior to a settlement in which Countrywide paid a paltry $8 billion--the damage done is much greater-- to eleven states, Illinois Attorney General Lisa Madigan stated: "Countrywide broke the law, homeowners did not."
Fed's August 2007 Back Door Bail Out of Countrywide
In August 2007, investors shunned Countrywide's asset backed commercial paper (ABCP) backed by its mortgage loans and demanded much higher interest rates. In the ensuing panic, Countrywide wanted to borrow around $11.5 billion from banks on its credit card-like revolving credit lines, but the banks balked. The banks asked the Fed for concessions, and the Fed agreed.
The Fed deal appeared to have been leaked. On Thursday, August 16, 2007, the Dow fell more than 340 points when it appeared Countrywide was about to go under, but rebounded to close down only 15 points. The next morning the Fed announced its new bank lending concessions.
The Fed bailed out Countrywide and its affiliated banks through its back door. The Fed agreed to let banks borrow against private label mortgage loans with phony "AAA" ratings, cut the banks' discount rate from 6.25%* to 5.75%, and extended "overnight" borrowings to 30 days.
BofA, Wells Fargo, U.S. Bank, Deutsche Bank, and JPMorgan Cut and Run
Banks that supplied money -- and in some cases now own -- suspect mortgage lenders also packaged up and sold those loans to investors. They own or owned mortgage "servicers" that cannot recover foreclosure costs combined with the costs of maintaining and reselling the house. After pumping up appraisals and falsifying borrowers' income on applications, banks are walking away and sticking taxpayers with the bill.
According to the Woodstock Institute, the mortgage servicers and trustees linked to abandoned properties in Chicago are Bank of America, Wells Fargo, U.S. Bank, Deutsche Bank, and JPMorgan Chase.
Despite evidence of widespread interconnected mortgage lending, securitization, and foreclosure wrong-doing and fraud, there are no meaningful felony indictments of senior executives at mortgage lenders or of senior executives of banks bailed out by taxpayers.
Read the full article here