Bill’s Place

November 1, 2011 Michael Bloomberg - The Good Democrat

Speaking at a business breakfast in midtown featuring Bloomberg and two former New York City mayors, Bloomberg was asked what he thought of the Occupy Wall Street protesters."I hear your complaints," Bloomberg said. "Some of them are totally unfounded. It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I'm not saying I'm sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn't have gotten them without that.

  

"But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it's one target, it's easy to blame them and congress certainly isn't going to blame themselves. At the same time, Congress is trying to pressure banks to loosen their lending standards to make more loans. This is exactly the same speech they criticized them for."Bloomberg went on to say it's "cathartic" and "entertaining" to blame people, but the important thing now is to fix the problem.  

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A Few Questions: Was it only 'Congress' that created and allowed pressures motivating banks to abandon due diligence banking? Or, did pressure from, and policies supported by, the executive branch play an even greater role, than Congress’s role, in the creation of the housing and mortgage bubble - which led to the financial crisis? Who in Congress supported the policies that created the problem? Which players in the executive branch and its bureaucracy enforced and expanded the Community Reinvestment Act and the Affordable Housing Act?

 

During a December 15, 2010 U.S. House of Representatives Judiciary Committee hearing witnesses gave testimony on issues relating to "Mortgage Servicing and Foreclosure Practices".¹

A critical focus of the testimony and discussion was apparent problems with the recordation of land title and note ownership. Witnesses claimed that the Mortgage Electronic Registration System (MERS)² has failed to reliably record changes in title and note ownership (chain-of-title). The accompanying video-clip is a segment from the C-SPAN video of the hearing:

If you are not familiar with MERS do a key-word-search for more information.

Footnotes:

1. see, C-SPAN Video Library, Mortgage Servicing and Foreclosure Practices House of Representatives Judiciary Committee December 15, 2010 at: http://www.c-spanvideo.org/program/297095-1

2. see, Washington Post - October 8, 2010 article titled, Reston Based Company MERS in Middle of Foreclosure Chaos By Brady Dennis and Ariana Eunjun Cha at: http://www.washingtonpost.com/wp-dyn/content/article/2010/10/07/AR2010100702742.html

 

 

See an article announcing the Massachusetts Attorney General’s lawsuit against firms in the mortgage industry.

http://realestate.msn.com/blogs/listedblogpost.aspx?post=f996a28d-1b02-4ceb-bf07-ac8483393a03

 

Also, watch this brief video-clip of Georgetown Law Professor Adam Levitin’s testimony before Congress titled, “Federal Regulators Don’t Want to Know: The Blind-Eye Policy” at>

 

The Mortgage Electronic Registration System (MERS) which is mentioned in the lead article is based upon a concept and operating model which was proposed to The Mortgage Bankers Association by the GSE’s, Fannie Mae and Freddie Mac, at a Mortgage Bankers Association meeting in the mid-1990’s. The Mortgage Bankers seemed to like the concept, so Fannie and Freddie financed the creation of MERS with a contribution of 2 million dollars each (from Fannie and Freddie). After MERS was created, Fannie and Freddie invited other major mortgage banking entities to join the MERS via an annual subscription arrangement.

 

The structure and the processes in the MERS system seem to have had some “destined to fail” characteristics which would make an interesting case study of ‘management control and audit procedures’. And, the system also raises some questions about the legality of the system’s processes in the context of common law of land title conveyance. See, “Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory” by Professor Christopher L. Peterson at > http://search.earthlink.net/search?q=Two+Faces%3A+Demystifying+the+Mortgage&area=earthlink-ws&channel=sbt_sgin&abtcgid=219&abtli=1

 

In late 2010 in a hearing before a Congressional Banking Committee the acting U.S. Controller of The Currency, John Walsh, stated that results from a multi-agency investigation of MERS would be released in early January of 2011. (The investigation was led by The Office of the Controller of The Currency. I never could find the results of that investigation).

 

A bit off-point, but still interesting, current California Governor, Jerry Brown, was the Attorney General of the State of California from 2007-2011. For much of that same period Jerry Brown’s sister, Kathleen Brown, was a member of the Board-of-Directors of Countrywide Financial [Henry Cisneros former Director of the Department of Housing and Urban Development (HUD), during President Bill Clinton’s first term in office, was also on the board at Countrywide during that time]. Kathleen Brown resigned from that board of directors shortly after information about the depth of Countrywide’s financial problems became public and only weeks before Bank of America acquired Countrywide. A few months later, when Jerry Brown was elected governor of California, Kathleen Brown almost immediately moved her Goldman Sachs municipal finance consulting office from Los Angeles, CA to Chicago, IL ‘to avoid any appearance of conflicts of interest’ with her brother’s gubernatorial administration. (See, “The Tragedy of Countrywide and Angelo Mozilo” at > http://news.muckety.com/2008/06/26/the-tragedy-of-countrywide-financial-and-angelo-mozilo/3712 and see Kathleen Brown's Wikipedia at > http://en.wikipedia.org/wiki/Kathleen_Brown