Later On

A blog written for those whose interests more or less match mine.

More on the JP Morgan theft of assets from the public and the DOJ cover-up

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A follow-on to Matt Taibbi’s article in Rolling Stone about the $9 billion witness—so called because JP Morgan settled with a $9 billion fine (or, from another point of view, bribed the DOJ with $9 billion and some headlines) in an agreement to keep the witness’s testimony secret and not reveal to the public what had been done. Eric Holder’s DOJ was very happy to agree—since Holder is now leaving the DOJ and wants a highly-paid position with Wall Street. It will be interesting to see whether he goes to work for JP Morgan Chase: a sinecure might well be part of the deal. It usually is.

Pam Martens reports more on the story in Wall Street on Parade:

Two years after attorney Alayne Fleischmann was downsized out of her job as a Transaction Manager at JPMorgan Chase, her boss, William Buell, was hauled before the Financial Crisis Inquiry Commission (FCIC) for interrogation on just how culpable the bank was in packaging and selling toxic mortgage backed securities.

Buell is the same man that Fleischmann exposed in aRolling Stone feature article by Matt Taibbi last week as the recipient of her detailed, internal letter in early 2007, warning him that the mortgage pools her group was reviewing contained poor quality mortgage loans unfit for purchase or securitization. Despite the written warning, Fleischmann would later learn that JPMorgan, in a drive to boost market share and profits, went forward and purchased the pool, securitized many of the loans, then sold them to unsuspecting investors.

But when Buell was asked directly during his questioning on September 15, 2010 by a Federal investigator for the FCIC if anybody had asked him to apply the brakes and stop pushing out questionable mortgage loans, Buell did not mention the formal warning letter he received from Fleischmann.

Another opportunity arose during the interview to mention the letter from Fleischmann and Buell again fails to reveal it. An FCIC interviewer asks:

“During the period 2005, May 2005 until let’s say the end of 2007, was there a period of time where you, in your position, noted that there was somewhat of a deterioration in the quality of the loans that were being presented to you to purchase?”

Buell: “I think that what we saw happening at the time was there was a very competitive process to offer a wider and wider array of products to borrowers. And, it wasn’t the case that in that period of time, until the very end, in that period of time that anybody that really I was involved with was looking at the situation and saying, wow, we really think guidelines and origination standards were deteriorating…”

That statement stands in direct contradiction to what Fleischmann alleges she told Buell in early 2007 in a formal letter. It would be difficult to forget such a letter in a span of three years. According to Taibbi in the Rolling Stone article, the letter was “long” and nicknamed “The Howler” by JPMorgan lawyers.

The seriousness that JPMorgan assigned to the FCIC interview of Buell can be surmised from the fact that it was held not in offices of the Federal government but in the law office of the Wall Street mega law firm, Paul, Weiss, Rifkind, Wharton & Garrison – the firm best known for getting Citigroup out of fraud charges. In addition to a lawyer from Paul Weiss, there were two lawyers from the JPMorgan legal department present.

At the outset, Buell is told that those interviewing him are Federal employees and the interview will be governed by 18 U.S. Code 1001. The statute is explained to him to mean that it will be a crime to make a false statement in his testimony.

It’s clear from the outset that Buell is nervous and measuring his words. Most of his questions are coming from Tom Krebs of the FCIC. The moment of panic for the witness begins at 39:26 on the official audio recording of the interview with the mention of not the name of Alayne Fleischmann but a different woman, Vicki Beal. (See FCIC staff audiotape of interview with William Buell, JPMorgan Chase.)

Krebs asks Buell: “Do you know a person named Vicki Beal?”

Buell: “I do not know Vicki Beal.”

Krebs: “Are you familiar with the firm of Clayton Holdings?”

Buell: “I am familiar…[voice drops off into low, breathless tone]”

Krebs: “How are you familiar with Clayton Holdings?”

Buell: “They’re a vendor that we hired to assist in the due diligence process.”

Krebs then hands Buell some documents from Clayton Holdings. Buell says he doesn’t recognize the documents and will need a moment to review them. Four minutes of nervous paper rattling with no one speaking commences. There are sounds of loud scribbling on paper suggesting that perhaps lawyers who don’t want to be captured on the tape recording are conferring with their client via written messages.

If Alayne Fleischmann is JPMorgan’s $9 billion witness, Vicki Beal and other officials at Clayton Holdings are the $100 billion witnesses against a broad swath of Wall Street. Not only did Clayton review mortgage loan files prior to securitization for almost every major Wall Street firm as an outside due diligence vendor, it ranked the loans as Event 1, 2 and 3. An Event 3 meant the loan should be rejected as high risk. On top of that, Clayton kept its own internal reports showing the rate at which the individual Wall Street firms were asking it to change an Event 3 loan, that it believed should be rejected, to a 2W – meaning that the Wall Street firm wanted the loan “waived” in as an acceptable loan.

After turning over their internal documents to then State Attorney General Andrew Cuomo in early 2008 in exchange for immunity from prosecution in the state, Clayton handed over the same documents to the Financial Crisis Inquiry Commission.

One of the documents released by the FCIC, which may have been among those Buell and his lawyers were looking at during the four minutes of silence and nervous paper rattling on the tape, was a page that compared the number of Event 3 loans waived in by JPMorgan compared to Merrill Lynch and Lehman Brothers. JPMorgan had waived in 51 percent of the Event 3 versus Lehman’s 37 percent and Merrill’s 32 percent. (See Clayton Holdings’ Reject and Waiver Rates.)

At the end of the four minutes of silence, Buell asks where this document comes from. Krebs says it’s been subpoenaed from Clayton Holdings and they have this information on effectively every Wall Street firm – a message to the lawyers in the room that the Federal government can now reconstruct just who was pumping out the dirtiest securitization deals. These Clayton Holdings documents have been used in lawsuits against JPMorgan from coast to coast.

Next, Krebs asks Buell to explain the job description of his boss, William King. Buell says King was the Managing Director of the Securitized Products Group. King, it turns out, supervised both the traders who made the outsized profits for the firm on toxic securities, as well as Buell’s due diligence department. King has been named in multiple lawsuits against JPMorgan.

When the U.S. Justice Department announced its $13 billion settlement with JPMorgan on November 19, 2013, it had this to say about the findings it had made from the Clayton Holdings documents: . . .

Continue reading.

This crime stinks to high heaven, and Eric Holder’s heavy thumb on the scales of Justice is quite evident. The criminals get away with all their personal loot, the corporation pays the fine, and the millions of those defrauded get bupkus. This is modern American justice: by the corporation, for the corporation, and of the corporation.

Written by LeisureGuy

10 November 2014 at 8:48 am

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