SEC blows a lay-up

Yves Smith and David Dayen have good takes on the SEC’s failed criminal prosecution of Brian Stoker, a former Citibank executive who was caught dead to rights for misleading investors on a CDO offering. David fears the outcome will be even less (hardly possible!) criminal prosecutions from the SEC:

Sadly, if the SEC can’t secure a conviction in a relatively open and shut case like this, it’s almost certain that they will fold up their tent and stop even a semblance of aggressive prosecutions against the banks. It doesn’t appear they have the personnel available to do the job. After 20 years of near-consistent defunding, I’m not that surprised.

Yves similarly thinks less prosecution will be likely as well, though she provides a vision for what law enforcement should look like when it comes to financial crimes.

Having been exposed as inept, the SEC is guaranteed to avoid another public embarrassment. So they will continue to draft claims that get good PR and settle cases. And it is a no brainer that the Obama Administration will refer to this decision as further proof that it is just too hard to pin anything on those bank executives. One has to wonder, given SEC enforcement chief Robert Khuzami’s deep involvement in the CDO business (he was general counsel of the Americans at Deutsche Bank from 2004 to 2009) and the Administration’s insistence that it’s pointless to even try to prosecute bank executives, whether this case was thrown, as opposed to merely lost. But absent evidence, never attribute to malice that which can be explained by incompetence.

Charles Ferguson and Eliot Spitzer are right. If anyone was really serious about going after bank misdeeds, the path of action would be to go after how bankers pay for drugs and prostitutes on the company dime. This would not be hard to prove and the threat of jail time would get them to sing. But it’s long been apparent that the problem is not the lack of viable courses of action, but lack of will to undermine the rule of our financial overlords.

The lack of will stems from a disbelief that Wall Street should be held accountable the way regular people are held accountable for their crimes.

Doing Nothing

Via John Aravosis, Roger Simon has a good column on the coming inaction in response to the Aurora shooting by President Obama. Simon writes:

Barack Obama looked haggard, spent, drained. He had just met with survivors and the families who lost loved ones in the Aurora, Colo., shootings.

Now, in front of the cameras and a small crowd Sunday, he stood in a blue suit, with no tie, his shirt collar open. It was about 8:45 p.m. East Coast time, and there was the beginning of stubble on his chin.

It was not his words that got to me, though they were simple and powerful: “Scripture says that ‘He will wipe away every tear from their eyes, and death shall be no more.’”

No, it was a few minutes later, when Obama described a teenager who had been shot in the neck by a bullet, and Obama put his hand to his throat to mark the spot and, as he kept talking, let his fingers linger there.

It was wrenching, touching, dramatic, sincere.

And baloney.

Not baloney because he was not moved by the terrible violence, not baloney because he did not feel for all the dead, their loved ones and the survivors. No, all those things were real to him.

What was baloney is that he intends to do nothing about preventing it in the future.

Of course Mitt Romney is just as bad as Obama here. But let’s take a look at what Obama’s Press Secretary Jay Carney said earlier this week, as documented in Playbook.

NO NEW OBAMA PUSH ON GUN CONTROL – From Jay Carney’s gaggle on Air Force One, en route Aurora yesterday afternoon: “[T]he President … believes we need to take steps that protect Second Amendment rights of the American people but that ensure that we are not allowing weapons into the hands of individuals who should not, by existing law, obtain those weapons. … [T]he President’s view is that we can take steps to keep guns out of the hands of people who should not have them under existing law. And that’s his focus right now.

Q: “In terms of like assault weapons or something like that, there’s no renewed push for a renewed assault weapons ban?”

CARNEY: “[A]s you know, there has been opposition to that since it expired within Congress … I wouldn’t argue with your assessment about that. So the President is focused on doing the things that we can do that protect Second Amendment rights, which he thinks is important, but also to make it harder for individuals who should not, under existing law, have weapons to obtain them.”

It’s hard to think of a more craven political response to this moment. In short, James Holmes’ killing of twelve people in Aurora and shooting of almost sixty more is not preventable. There is nothing the President supports doing to make such an event less likely in the future, as Holmes had done nothing illegal prior to opening fire on a theater full of Batman fans.

I have plenty of friends who are gun owners and I often see memes or off-hand comments on Facebook about Obama coming after their guns. It’s hard to think of a narrative less based in reality in American politics than this one. Obama has zero desire to increase regulation of guns, let alone try to take them away from gun owners. It’s a joke. Keep in mind, even before Obama had refused to pursue gun control following the shooting of Arizona Congresswoman Gabriel Giffords, the Brady Campaign had given Obama an “F” on every issue it scored.

I don’t have a perfect conception of what sane gun control policies would be and where the line between protecting our Second Amendment rights balanced with not having a massacre in our country every few months is. I would guess something along the lines of not allowing weapons whose sole purpose to kill many people at once – things like 100 round drum clips and assault weapons. The answer is likely going to be somewhat arbitrary, but that doesn’t mean we shouldn’t strive for a system of laws which seeks to prevent these shootings, not take them as an unavoidable given in America.

Regulatory failure

Marcy Wheeler spots a new survey of 500 American and British bankers which suggests that not only do a significant portion of them feel comfortable with the idea of acting illegally to be successful, but that they believe regulatory bodies such as the SEC and FINRA are incapable of deterring illegal behavior by bankers. Marcy notes:

The two details, together, are more important than in isolation. Not only do a significant proportion of finance execs admit they’d engage in wrongdoing if they wouldn’t get caught, but they also say the SEC and FINRA aren’t going to stop them.

No wonder the banksters keep crashing the economy.

This also gets at Bill Black’s repeated descriptions of culture within Wall Street banks as criminogenic.

Bankers believe that not only is it OK to break the law to make millions, but that there’s nothing regulators are going to do to stop them. Separate from the personal ethical failures and character flaws that this reveals in the banking community, it is clear that the regulatory regime governing the banking and financial sector is a complete joke.

Moving on isn’t always right

Charles Pierce:

Bloody Sunday was what touched off the bloodshed that did not end until Bill Clinton and George Mitchell got both sides in a room and banged their heads together until they agreed to stop slaughtering each other. The fault for the modern outbreak of the “Troubles” lay always with the British military. This was a religious Sharpsville and it always was. Now, it seems, the reconstituted police force in Northern Ireland has decided to look into the possibility of bringing murder charges in connection with the shootings 40 years ago. This is why “getting past” things is not always a serious governing philosophy. A country that takes its history seriously knows this.

A Great Victory for Nick & Colleen Over Citibank

Nick Espinosa is an organizer with Occupy Homes MN, where he’s helped people facing foreclosure and eviction fight off the bank and keep their homes for the last eight-plus months. Nick is also well-known in activist circles for being the creator of the Glitter Bomb as a tactic in support of LGBT rights. In short, he’s a great activist who’s putting his full being into helping others. Unfortunately while Nick had been helping other families in his community, his mother, Colleen McKee Espinosa, received a foreclosure notice. After briefly falling behind on her payments, Colleen had repeatedly asked Citibank to let her become current on her mortgage, but they wouldn’t let her pay. Instead the bank moved to take the home, with a Sheriff’s Sale set for Wednesday, July 13th.

Thanks to organizing by Nick and other Occupy Homes MN activists, (which I help run), and countless supporters around the country, Citibank has come to the table and found a solution for Colleen and Nick, stopping the sale.

An official with CitiMortgage’s Executive Response Unit contacted the Espinosa family with news that Citibank had approved a loan modification that would keep the family in their home and reduce their payments by one-third on a 7.5 year payment plan. The dramatic news came less than 24 hours before the house was to be sold at auction on Wednesday, June 13.

“I’m so relieved that my family’s home of 16 years will not be on the auction block tomorrow,” said Colleen McKee Espinosa, a nurse and single mother who received widespread support after she pledged not to leave her home without a good faith negotiation. “We are grateful that Citibank has decided to accept my payments, and we look forward to signing the final paperwork.”

“I am deeply grateful to everyone from across the country who stood with our family as we fought our foreclosure,” said Nick Espinosa, Colleen’s son, and an organizer with Occupy Homes MN. “I’m inspired by the outpouring of community support, and it renews my commitment to stand with other families who are struggling to stay in their homes.”

This is a tremendous victory for Nick and Colleen and their community, as well as the entire Occupy Our Homes movement. But how did it happen and what should we take away from it?

Colleen’s choice to fight back was critical to victory. She decided to share her story and talk to her neighbors, Occupiers, and community organizers about how she could put pressure on Citibank to make a deal. Banks aren’t showing themselves willing to magically reduce homeowners’ principal out of the goodness of their hearts (let alone for the financial benefit of their investors). But homeowners who are standing up and saying that they are not ashamed to be fighting back are finding that they are can get solutions from the banks.

The banks want homeowners to be ashamed about being in foreclosure. They want us to keep our mouths shut, except to open wide while we take the bitter medicine of losing our homes. But Colleen’s story shows, as is so often the case, it’s not the homeowners fault for being in foreclosure. When the bank refuses to take your money, it’s obvious that it’s not your fault. When the bank defrauds you and sells you something other than what you were told you were getting, it’s not your fault. When the business you work for goes under and you lose your job in an economy that Wall Street broke, it’s not your fault for coming to foreclosure. When your government job is eliminated as part of austerity pushed by financial elites to, again, try to repair the economy that they broke, it’s not your fault when you get a foreclosure notice. Banks demand that homeowners feel shame for situations created entirely from bank behavior.

As McKee Espinosa says, “If anyone should be ashamed, it’s the banks for tearing apart our communities after we bailed them out with our tax dollars. When we stand together we can win, and I believe thousands more will.”

People like Colleen are showing us all that when homeowners fight back against the banks, they can win. While servicers aren’t rushing to make deals to keep families in their homes and keep chasing profits through foreclosures, when communities organize to help a family stay in their home, the banks are coming to the negotiating table.

The banks have destroyed so much of our economy. Over 7 millions homes have been foreclosed on and at least that many more are likely to happen over the next three to four years. A new study by the Federal Reserve (pdf link) says that median net worth fell 38.8% between 2007-2010, largely driven by a losses in housing. Policy makers, regulators, and politicians have failed to neither pursue legal accountability for bank crimes relating to the housing crisis, nor put in place programs to aid homeowners in crisis. In the absence of meaningful law enforcement and aid solutions, it is up to communities to rally together to fight off foreclosures, as Minneapolis rallied around Colleen and Nick.

Community pressure around brave homeowners like Colleen is producing solutions that are keeping families in their homes. It is forcing banks to behave with a shred of decency and humility. Indeed, it is the hope of the Occupy Our Homes movement that by forcing banks to change what their doing with foreclosures one case at a time, we can build up enough pressure to force banks to change their foreclosure mitigation policies nationally, so all  homeowners can benefit.

This is going to be a long fight, but Colleen and Nick are proof that homeowners can beat big Wall Street banks, if they stand up and organize in their communities and wield their power for change. Find out more at or