The Phaserl


There Will Be Swamp – Steve Mnuchin Confirms Treasury Secretary Nod

by Michael Krieger, Liberty Blitzkrieg:

While I’m not a Dodd-Frank fan, it’s not because it was too harsh, but because it didn’t really do much of anything. It was the typical neoliberal bait and switch, designed to look tough for public consumption, while merely making tweaks around the edges of a financial system that requires systemic, paradigm level change.

Trump’s support of repealing Dodd-Frank tells you all you need to know. A Trump Presidency will see Wall Street felons who should be in prison, running as wild and free as ever.

He will be the same thing to distressed working class whites that Obama was to the black community. A fake messiah and a shyster.

– From May’s post: Donald Trump’s True Colors Emerge as He Snuggles up to Wall Street

The fact that Steve Mnuchin was a Goldman Sachs partner is the least of my concerns when it comes to the man. Indeed, if someone wanted to create a playing card deck of sleazy Wall Street financial crisis opportunists, it’d be hard not to include Steve Mnuchin.

What exactly am I talking about? Specifically, I’m referring to the collapse of IndyMac (renamed One West), and the generous helping of government welfare Mnuchin and his partners received upon purchasing the failed banking institution. This is a financial crisis saga that is unknown to most, despite having received some extensive coverage over the past year. One of the best articles on the topic was written by David Dayen in his piece, Donald Trump’s Finance Chair Is the Anti-Populist From Hell. Here are a few excerpts:

Donald Trump’s first major staff selection since securing the Republican nomination, national finance chairman Steven Mnuchin, co-founded and manages the hedge fund Dune Capital. Not only did he make partner at Goldman Sachs, so did his father in the 1960s. With over 30 years of experience at the top levels of finance, Mnuchin was present for every recent major banking innovation, including those that brought the country to the brink of economic collapse.

Mnuchin’s presence in the campaign reveals how the qualities Trump loyalists projected on their hero don’t measure up to the truth. They have venerated him throughout the Republican primary for rejecting the dirty business of pay-to-play politics, and for populist vows to protect the ordinary worker. But in selecting Mnuchin, not only has Trump submitted to the realities of presidential campaign finance; he’s chosen one of the most notorious bankers in America to carry it out.

When I heard Mnuchin’s name last week, I immediately remembered the front lawn of his mansion. Back in 2011, local housing activists and the Occupy movement in Los Angeles camped out on that lawn to save the home of Rose Mary Gudiel, a La Puente, California, resident who faced eviction after being just two weeks late on one mortgage payment. The activists threatened to move all of Gudiel’s furniture into Mnuchin’s $26 million Bel Air estate if the eviction wasn’t stopped. Twenty police officers and a helicopter met the protesters.

Why was Mnuchin’s front lawn the focal point for the protest? Because years after forming Dune Capital in 2004, Mnuchin’s hedge fund purchased the failed lender IndyMac, one of America’s largest home lenders and a leading distributor of Alt-A mortgages, a subprime hybrid which did not require borrowers to accurately state their incomes. After IndyMac failed, Dune led the investment group that purchased it from the Federal Deposit Insurance Corporation (FDIC) in 2009, renaming it OneWest Bank. Mnuchin became OneWest’s principal owner and chairman.

OneWest accomplished these foreclosures through fraud. Erica Johnson-Seck, a vice president of foreclosure and bankruptcy for OneWest, explained in a July 2009 deposition that she “robo-signed” 6,000 foreclosure-related documents per week, spending just 30 seconds on each sworn affidavit that attested to the veracity of all relevant information in the case. Johnson-Seck admitted to not reading the documents before signing them, to not knowing how the records were generated, and to not signing in the presence of a notary, all of which made the affidavits she signed false evidence in court.

The OneWest subsidiary Financial Freedom executed 39 percent of all foreclosures on reverse mortgages between 2009 and 2015, despite servicing only 17 percent of the market, according to data from the Department of Housing and Urban Development (HUD) obtained by the California Reinvestment Coalition. OneWest disclosed in its most recent annual report that it’s under investigation for this disproportionate share of “widow foreclosures” by HUD’s Inspector General. The victims include 103 year-old Myrtle Lewis of North Texas, who OneWest put into foreclosure after her insurance coverage lapsed; Karen Hunziker, who got a foreclosure notice from OneWest ten days after her husband passed away in 2014; and a host of others.

Trump’s loyal fans aren’t likely to scrutinize Mnuchin’s record, but they should. You can measure political candidates in part by who they associate with. The foreclosure history in Mnuchin’s past reflects an extreme mentality of profit at all costs, and hardly a viewpoint of standing up for the little guy. Trump as populist was always something of a pose, covering for a deep nationalism and antipathy to immigrants. The Mnuchin pick just brings that into sharper relief.

Trump’s main money-chaser has profited off the suffering of ordinary Americans for years. There’s no reason to believe Trump will offer a better deal to the working class.

Moreover, an article published in The Nation covered some details of the sweetheart deal the government gave Mnuchin and team for the privilege of turning around to abuse average Americans. Here’s an excerpt from, The Worst of Wall Street: Meet Donald Trump’s Finance Chairman.

The Mnuchin group paid FDIC $1.5 billion for the bank, far less than the value of IndyMac’s assets. The FDIC was so desperate to unload IndyMac that Mnuchin and his colleagues were able to obtain, as part of the purchase deal, a so-called “shared loss” agreement from the FDIC which reimbursed these billionaires for much of their costs for foreclosing on people unlucky enough to have mortgages from IndyMac.

Within a year, the group that the Los Angeles Times called a “billionaires’ club of private financiers” had paid themselves dividends of $1.57 billion. In other words, the FDIC took much of the risk by subsidizing the bank’s troubled assets, while Mnuchin and his colleagues pocketed the profits.

The California Reinvestment Coalition—a nonprofit organization that pushes banks to reinvest in low income communities and communities of color—determined from Freedom of Information Requests that the FDIC had already paid out over $1 billion to reimburse OneWest for the cost of over 35,000 foreclosures in California and an unknown number in other states. CRC also estimated that the FDIC will eventually pay out another $1.4 billion for the costs associated with even more foreclosures in the future.

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1 comment to There Will Be Swamp – Steve Mnuchin Confirms Treasury Secretary Nod

  • rich

    “Wells Fargo bails out Bob Corker and his cronies.”

    When Bob Corker ran for the U.S. Senate, he did so by running on the story of a successful businessman who could “get things done.” In reality, Corker – like a lot high-flying developers leading up to and during the housing crisis – was trying to get his name off millions in debt guarantees. And Corker’s cash windfall from the sale of his properties to a controversial businessman named Henry Luken likely did not relieve him from his honker of a debt. Whatever continued debt (also known as a “contingent liability”) Corker is holding, it has remained a secret, since Senate financial disclosure rules didn’t require him to admit to “contingent liabilities.” But that didn’t make the debt any less real. And in reality, if the market downturn started picking up speed (which it did), those loan guarantees could ruin Corker and probably Henry Luken as well.

    The best we can determine is that Luken assumed the debt from his conveniently-timed purchase of Corker’s properties, while giving Corker $500,000 (believed to be a cash advance to help Corker, whose assets were mostly locked up in his commercial properties). The “Big Lebowski” of the debt was $28.1 million owed to GE Capital. When Corker rolled up the debt with GE Capital, he was required to (and did) submit a Universal Commercial Code (UCC) filing, placing his name on the debt. When the debt was satisfied, either by payment or transfer, GE Capital was supposed to release Corker with another filing. This is where it starts to get murky. RTP asked our accountant (Ernie T. Eyeshade, CPA) if he could find any such release in the financial disclosures or elsewhere. He came up empty.

    So the first question for Bob should be: Did GE Capital release you from a $28.1 million debt? And if not, where is that debt now and how was it satisfied? And before Bob gets his tighty-whiteys in a wad, we again acknowledge that the disclosure report doesn’t require the listing of a contingent debt. But we ask anyway because, for as you will see, the existence of that debt and where it went is key.
    Show Me Da’ Money

    pay-upIt’s an important question. For if GE Capital did not release Corker from his contingent liability, and if Luken and/or Corker could not cough up the cash as the commercial and housing market began to spiral downward in 2008-2010, then GE Capital would send some accounting goons around to collect from Luken. If Luken couldn’t pay, then they would come after Corker for the dough.

    How Corker made this debt disappear is not a tale of business or financial derring-do but a tale of apparent skirting, and perhaps stepping over a legal or regulatory line.

    Bear with us, because this gets a little complicated. But it is a tale that must be told.
    The Deal

    Corker was the owner of real estate worth between $62 million and $228 million. He had bought Coca Cola heiress Alice Lupton’s old mansion on Minnetonka Road and was the mayor of Chattanooga. In addition, he was the former roommate and friend of Pilot Oil scion, Jimmy Haslam (and brother to the soon-to-be governor, Bill Haslam). So Bobby was connected — big time.

    But Corker was also the owner of a debt that could strangle some third-world countries.
    Corker, Wells Fargo and a “Harmonic Convergence” of interests.

    The real story is that GE Capital would have had to sell off the Luken loan at a discount or move to collect the outstanding balance themselves. The latter would have put GE in a very difficult spot: having to sue a sitting U.S. Senator who sat on the committee that was unquestionably the most important committee in Congress for a firm like GE Capital.

    In rides Wells Fargo, who inexplicably decided to refinance the Luken/old Corker debt at a time when most banks were spirally down the toilet and re-financing was just a pipe dream for most. Luken “discovered” Wells Fargo and convinced them to finance an under-capitalized loan with a huge debt attached. The story they spun at the time was that Wells was “excited” about Chattanooga’s economic prospects – this at a time when the country and banks were facing economic disaster. Such refinancing of loans were not just hard to find in 2009 – they were damn near impossible. Hell, even Warren Buffet couldn’t refinance a loan during the 2009-2010 meltdown.

    According to our sources in the financial community, in practically every similar circumstance, if a firm like Wells were to take over such a loan it would have insisted on a refinance discount – a discount Luken and/or Corker would have to pay. Again, a bad position to be in against a U.S. Senator. More likely, Wells bought the entire loan – maybe even at a premium that would have allowed Corker to be removed as a contingent liability. Since researchers have found no record of Corker making another UCC filing removing himself from the loan, there is a possibility he is still on the hook. But now he would be on the hook to his friends at Wells – who were coming in and out of his door to lobby him like ants to a picnic on such things as GSEs (more on this later).

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