How Citibank Dumped Lousy Mortgages on the Government

[stockholmer]

http://www.propublica.org/article/how-citibank-dumped-lousy-mortgages-on-the-government?source=patrick.net

Citigroup agreed yesterday to pay $158 million to settle a lawsuit http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2012/HUDNo.12-032 over bad loans that the bank passed on to the Federal Housing Administration to insure. The whistle-blower who originally brought the case, Sherry Hunt, an employee of Citi's mortgage department, said the company actively undermined the process that was supposed to check for fraud in order to push through reckless loans and get higher profits.

The suit itself makes for good reading. http://www.propublica.org/documents/item/293149-uploadcitimortgage-inc-complaint-2-15-12-2 We've pulled out the juiciest bits, and explain just what Citi appears to have been doing.

Some background: The FHA insures one-third of the mortgages loans http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/fhahistory in the country, taking on the risk of homeowners' default from lenders like Citi. The government requires lenders to certify that insured loans meet FHA standards.

Citi appears to have flouted those standards. According to the lawsuit, the bank passed along subpar loans to the FHA until very recently, making "substantial profits through the sale and/or securitization of FHA-backed insured mortgages" while "it wrongfully endorsed mortgages that were not eligible." In the settlement, Citi, which was bailed out by taxpayers in 2008 http://projects.propublica.org/bailout/entities/96-citigroup to the tune of $45 billion, "admits, acknowledges, and accepts responsibility" for passing on bad loans. http://www.propublica.org/documents/item/293150-uploadcitimortgage-inc-settlement-agreement-2-15

The suit's allegations...............................

snip

[Octafish]

1. Excellent article! Peanut-sized fine, considering Citi got a $45 billion bailout.

The U.S. Taxpayer picks up the tab for Wall Street. Again. I'd say it's been a pleasure, but it's not. And it's become a regular routine:

Bad Guys rip off the money.
The Banksters say they had no clue.
The Good Taxpayers just happen to be there when needed to pay off the Banksters.
Corporate McPravda does it's thing and says there's nothing they see that could've prevented said disaster, so it's time to move on.
Whatever Administration, Congress, and the Courts agree.
Repeat.

The system has worked like charm since the S&L crisis of 1990 and all the way to the present day.

Know your BFEE: They Looted Your Nation s S&Ls for Power and Profit

SNAFU: The 1-percent of 1-percent get the gold. We the People get the shaft.

[stockholmer]

3. wonderful synopsis

[Octafish]

6. Mr. Lew must appreciate the same thing as Phil Gramm -- deregulation.

Obama's New Chief Of Staff Made Some Amazing Hedge Fund Investments At Citi

Lisa Du
Business Insider
January 10, 2012

EXCERPT...

But the incoming chief has another facet to his work history—he's a former Wall Streeter, and did a stint overseeing hedge funds for Citigroup from 2006 to 2009, and as the Chief Operating Officer of Citi Alternative Investments in his last year there. One of the hedge funds Lew was in charge of at Citi made a windfall in 2008 by shorting mortgage securities, and the the former executive was awarded a $900,000 bonus the year after.

SNIP...

Most of Lew's Wall Street past has already been covered extensively by the media when he underwent a Senate confirmation hearing to become the head of the Office of Management and Budget in 2010. During that hearing, Lew said he did not believe deregulation caused the financial crisis—a striking differentiation from his fellow Democrats, who often cite deregulation of Wall Street as the root cause of the 2008 financial crisis.

CONTINUED with links...

http://articles.businessinsider.com/2012-01-10/wall_street/30610826_1_financial-crisis-deregulation-jack-lew

Thank you, stockholmer, for the kind words and a most important post.

Where my conceit toward the son of deregulation comes in:

Know your BFEE: Phil Gramm, the Meyer Lansky of the War Party, Set-Up the Biggest Bank Heist Ever.

[cherokeeprogressive]

2. And the punishment for being part of this? You get demoted to White House Chief of Staff...

"In June 2006, Lew was named chief operating officer of Citigroup's Alternative Investments unit, a proprietary trading group. The unit he oversaw invested in a hedge fund "that bet on the housing market to collapse."

http://en.wikipedia.org/wiki/Jack_Lew#Between_Clinton_and_Obama_tenures

[cherokeeprogressive]

4. Hmmmm. The post directly above this was a "thread killer". Wonder why...

If it contained information that was erroneous, it would have dozens of responses pointing out that fact.

I'm only being ignored by 16 people. So what's up?

Is this a subject no one wants to talk about since CitiGroup's former Main Man is President Obama's current Chief of Staff?

How fucked up is THAT?

[Octafish]

5. It's dynamite that would blow up a romanticized ideal.

The guy's one of Them, in the service of the money and power.

Thank you for an excellent addition to this thread, cherokeeprogressive. It's of infinite value for those who care about democracy and the Democratic Party.