Wade Rathke: Chief Organizer Blog » goldman sachs

Come On! Private Banks Poaching Fannie Mae

dine — Sat, 22 Jan 2011 15:18:07 +0000

subprime mortgage securitization

New Orleans On ESPN’s Sportscenter during the seasons they have a feature called “Come on!” in which they feature unbelievable or bonehead plays. We need that in other fields of public life and politics. Reading about the efforts of banks like Wells Fargo and JP Morgan Chase along with the various trade associations to try to get their noses under the Fannie Mae and Freddie Mac restructuring tent to shill a profit by issuing government secured mortgages, I could only thing: Oh, come on! How ridiculous!! These are the same banks that just brought us the Great Recession due to their irresponsible lending and securitization schemes, and now they should somehow be allowed to profitably issue government mortgages. Though by now we all ought to be used to the way that Wall Street thumbs their nose at all of the economic realities that all of us face, this is wildly unbelievable.

Reading the New York Times article by Louise Story, it was clear this was another predator’s ball with not only Wells and Chase at the trough, but also Goldman Sachs, Credit Suisse, and Morgan Stanley. All of this reminds me of the scam that the Obama Administration stopped in recent years of allowing private interests to wildly profit as the middle men brokers for federally offered student loans. Banks were making out like, well how else can I say this, bandits. Stopping this sticky fingered scandal saved huge amounts of money, but now they are baaaaccccckkkkk with something perhaps even more outrageous.

The other backassedwards part of this is the problem of misdirected blame that still falls in the direction of Fannie/Freddie for supposedly bringing down the house by loaning to lower income citizens without looking at affordability or sustainability. I understand the ideological need to blame the poor, but it’s important to point out that there is still no factual evidence that these loans, that should have been encouraged by the government, had anything to do with the mess. Not only would we be throwing out the baby rather than the bathwater, but it seems we would be institutionalizing the bathwater and leaving the baby homeless, so to speak.

There’s probably a debate worth having about how many and how much of the “middle class” need to have federally guaranteed mortgages through these vehicles, but it seems obvious the we will need even firmer support for working class families in the future to have a chance at home ownership in we ever get out of this recession. We need to slap away the hands trying to pretend this is all a cookie jar, and tell them to not only mind their own business, but maybe even try to get better at it than they have been (let’s see banks portfolio more mortgages on their own before they claim to know how to issue others), and keep federal institutions trying to solve the puzzle of adequate and affordable housing for all Americans again.

Santa Barbara Finally Pulls Up Short

dine — Sat, 26 Dec 2009 23:32:15 +0000

Quepos It was an extra present under the palm tree to read in the pre-dawn that Santa Barbara Bank & Trust was being pulled out of the business of factoring RALs, predatory refund anticipation loan for Jackson & Hewitt and other companies in the viciously competitive tax services market for lower income and working families. Several years ago direct negotiations with HSBC, previously the largest factor for such loans, had pulled out of the market (which I have discussed in Citizen Wealth at some length) and Chase had been reforming its practices, but Santa Barbara had been the big holdout.

Partially, it was simply the “one that got away.” It’s footprint was smaller with a base in Santa Barbara that was too far away from our groups and members to do much damage. They had gotten into this predatory business and done very well, but were impervious to the impacts. What did it matter to their normal customer base in Santa Barbara after all?

Direct discussions with Jackson & Hewitt, when I was with ACORN, when round-and-round, with J&H always claiming they would not “unilaterally disarm,” but would do so as H&R Block did so and others like Liberty Tax Services. H&R Block was going to move from HSBC to its own bank. I’m not sure if that happened or not. Liberty was also a big customer for Santa Barbara.

The actions of OCC and other banking regulators are key here, because the withdrawal of Santa Barbara from this line of lending could finally push RALs out of the market, which would be huge.

This was the Christmas present report from Bloomberg News:

Regulators ordered Santa Barbara Bank & Trust to stop providing the loan money, which covered about 75 percent of Jackson Hewitt’s financial products program, according to a regulatory filing by Jackson Hewitt.

Shares of the company, the No. 2 tax preparer behind H&R Block, dropped $1.34 to $4.50 on Thursday.

The Office of the Comptroller of the Currency told Santa Barbara Bank & Trust on Dec. 18 that the lender would not receive regulatory approval to originate the refund anticipation loans in 2010, according to a statement from the bank’s parent, the Pacific Capital Bancorp.

A bank spokesman, Tony Rossi, said that “the tax refund loan business is a sort of niche business that falls outside of what would be considered core banking operations.”

The bank signed a nonbinding letter of intent with a private equity firm to sell the tax business, the statement said.

Tax preparers are locked in a battle for customers, with Jackson Hewitt vowing this month to regain market share from H&R Block. Firms can attract clients with refund anticipation loans, in which customers who need cash immediately can get a short-term loan, typically lasting a few weeks, that is based on the expected amount of their tax refund.

Jackson Hewitt, with 6,600 outlets and almost three million clients, has been losing customers to H&R Block and Intuit, which makes TurboTax software. It suspended its dividend in March and has hired Goldman Sachs to explore “strategic alternatives,” language that typically means a company may be sold.

The next target for economic justice reformers and citizen wealth advocates will need to be the unknown “private equity” company that will be tarnishing its reputation and brand – if such a concept is possible in private equity – by buying the Santa Barbara RALs business. The other target may end up being whomever buys Jackson & Hewitt if Goldman Sachs is able to do the offload.

You sow what you reap.

Pampered, Rich, Lazy Bankers Dis Prez

jstuart — Tue, 15 Dec 2009 22:13:51 +0000

New Orleans The meeting between a dozen big bankers and President Obama was just for show anyway, but three of the big dawgs were too trifling to make it from New York to DC for cryeye because of fog. The three scofflaws were Goldman Sachs, the poster child for banking excess, Citigroup, the face of a crippled institution, and Morgan Stanley, another “new” bank reincorporated to get to the pig trough for billions. They were call-ins from New York not Iraq or Afghanistan or somewhere really hard to manage travel.

Even more embarrassing to these three has to be the fact that the head of PNC drove himself from Pittsburgh to DC on Sunday night to make sure there were no problems. Another “new” bank, incorporated just for the billions, American Express, joined hoi polloi with the rest of the commuters and took Amtrak. Richard Parsons (Citi), John Mack (Morgan Stanley), and Lloyd Blankfein (Goldman Sachs profiteers) clearly just couldn’t be bothered to either plan ahead and check into the weather or ride government transportation on the train with the little folk.

Having traveled for a living for decades, I just don’t buy any of their excuses. They are so lame they are not worth repeating.

All of which pretty clearly communicates their disrespect for the President, the White House (where a lot of people would love to be invited to a meeting about the financial condition and future of the country!), and their thanks to the American people for the big bailout. Shame!

The President was begging with a little stick for them to tell their lobbyists to get on program which was pretty pathetic anyway. Once again he asked them to figure out a way to loan to small businesses and homeowners, but this is a “beg” that he knows they will ignore and that he will not enforce. The lobbyist plea is mainly about not being embarrassed by having bank lobbyists, who have been virtually government “contract” employees not so publicly give the government lobbyists the red ass on Capitol Hill, where some of these ironies have not been forgotten or forgiven for different reasons on either side of the aisle.

The meeting was so unimportant it didn’t even make the headline or the front page of the Wall Street Journal. Rupert Murdoch, the WSJ and Fox News magnate, seems to think if the other fellas didn’t even need to both to attend, then he sure didn’t need to pretend this meeting was even news.

This whole bank bailout thing is starting to have a disgusting aftertaste when even the welfare recipients can’t grub for billions without showing any class at all.