“We Have Good Processes and Good Controls”

By James Kwak

One of the things I can’t stand about the corporate world is the tendency of senior executives to say things that they wish were true, without verifying whether they actually are true or not. Perhaps my favorite example of all time is Stan O’Neal’s internal memo from mid-2007:

“More than anything else, the quarter reflected the benefits of a simple but critical fact: we go about managing risk and market activity every day at this company. It’s what our clients pay us to do, and as you all know, we’re pretty good at it.”

But here’s another good one from Barbara Desoer, head of Bank of America’s home loan division (to Bloomberg):

“We believe that our assessment shows the basis for past foreclosure decisions is accurate. We have good processes and good controls.”

And apparently she’s sticking with this line. This week she told Congress, “Thus far we have confirmed the basis for our foreclosure decisions has been accurate.”

Well. She might want to have her people read the newspaper. There was the Sun Sentinel story about a man who was foreclosed on by Bank of America, despite not having a mortgage . . . with anyone. Or she might try talking to some of the other people appearing before Congress. Adam Levitin, in his testimony today, says this (p. 21):

“Many foreclosure complaints are facially defective and should be dismissed because they fail to attach the note. I have recently examined a small sample of foreclosure cases filed in Allegheny County, Pennsylvania (Pittsburgh and environs) in May 2010. In over 60% of those foreclosure filings, the complaint failed to include a copy of the note. Failure to attach the note appears to be routine practice for some of the foreclosure mill law firms, including two that handle all of Bank of America’s foreclosures.”

And this is without even looking for examples, just stuff I’ve blogged about before or happened to be reading this afternoon.

Now, if you want lots of details about how the banks and their lawyers are flouting the rule of law, there are better blogs than this one. As a member of the reality-based community, I just want to register my indignation at the corporate world’s disdain for, well, reality.

Oh, and do you know what Barbara Desoer says is her best quality in that Bloomberg article? Common sense.

Update: My outrage at Bank of America actually distracted me from my original point. If you want a readable, comprehensive, but not too long overview of the legal issues involved in the foreclosure scandal, read Levitin’s testimony. It’s excellent.

42 thoughts on ““We Have Good Processes and Good Controls”

  1. “Be careful of what you pay executives to do…”

    For right or wrong reasons, a CEO carries two other titles: Chief Pitch Officer and Chief Protection Officer for all things concerning the firm’s stock price. The compensation and subsequent behaviors reflect these three jobs. The quotes you provided are still disturbing but are not surprises given the compensation framework at the CXO level.

    Paying executives for integrity when their competitors’ stock prices appear to offer better returns – even if the competitors pumped up their own prices through wacky means – is *soooo* passé. Some may argue that the practice never existed in particular industries…

    song currently stuck in my head: “can’t find my way home” – gilberto gil

  2. The first basic fact anyone needs to know about foreclosuregate is this:

    Anyone who works for a bank or banklike entity or claims to do so, can decide he wants your house, forge documents claiming the right to foreclose, and have a decent chance of getting a judge to take him seriously. The case mentioned above is one of many such examples.

    That’s just a more egregious example of what any servicer does when it forecloses, in many or most cases.

    The collapse of the lawful title conveyance system also means that many, perhaps most, mortgages have become irrevocably separated from the title, and are merely unsecured loans.

    The conclusions are clear. If the banks initiate anything, demand that they Show the Note.

    Better yet, since when we pay the mortgage we’re not paying any legal noteholder, but just a criminal with no standing or title, everyone should simply stop paying the mortgage. Underwater or not, distressed or not, just stop paying, stay in the house, maintain the property, keep paying the property tax.

    If we could get a critical mass of people jubilating the debt that way, we could break the banksters right there.

    BTW, the failure to convey the titles to the trusts means that all the MBS are also mere unsecured loans, and all those toxic “assets” on the zombie banks’ balance sheets, the propping up of which was the whole nominal purpose of the Bailout, really are worth zero.

  3. Actually, the problems go way beyond whether the note has been attached to the complaint.

    There is serious questions as to whether the mortgage liens are valid and whether the party bringing the foreclosure suit has standing to bring such action. It all ties in to an attempt by the mortgage industry to evade the fees that counties charge for registering liens and transfers, by creating an entity known as MERS. The way in which it was done has effectively vitiated large parts of the system of tracking ownership of real property in this country.

    The details can be found through links at Nemo’s blog, self-evident.org. I highly recommend that post (and the documents it links to)–they are lengthy but a very enlightening read!

  4. Come on, James. Executives don’t say that stuff because they think it’s true or because they want it to be true.

    They say it because they’re covering their ass.

    Also: if you repeat a lie often enough …

  5. The adjective “good” represents a value judgment. Ms. Desoer’s testimony makes perfect sense if good = profitable, or, more precisely “a profitable process for which we have not yet been indicted.” That definition of good has made money for a lot of folks.

  6. http://www.thedubyareport.com/bushbin.html

    People should take a good look at what the materials collected above imply. The MOVIE: “INSIDE JOB” is making its way across the country, but little heed was made when a revealing expose by the same name gave a comprehensive profile of looting in American Political finance history.

    INSIDE JOB: The Looting of America’s Savings & Loans.
    (1991 paperback revised edition: HarperCollins Publ.)
    by Stephen Pizzo, Mary Fricker, & Paul Muolo.
    Everything that is happening now has happened already and is documented in this book. It is the same scenario and model, only now it is greater in scope and scale. It is based on Looting. Until we get prosecutions for what has happened to America, there is no justice in America.

  7. I spent nearly forty years in the legal real estate transaction business. In most states, foreclosures are the simplest legal procedure to pursue through the courts. Because they are simple to do, they are also simple to review. Anyone who has been foreclosed in the past two years, is currently under notice, or in delinquency should find an expert to review their file. There are lots of paralegals who could do this review without the assistance of an attorney. If they find a flaw, in the process or documentation, then all they need to do is say so and the foreclosee can contact a law firm to handle the case, appeal, or block the transaction. Not having the note and security document is a fatal flaw in most cases. No foreclosure can proceed without a properly executed evidence of debt (promissory note) and a security instrument properly recorded, as well as documents which prove who owns the note presently, which must match the party foreclosing. Without these documents, a foreclosure is DOA. My suspicion is that more than half of the foreclosures being filed right now do not have sufficient legal documentation to proceed.

    Years ago, we tried clearing title liens on properties caught in the S&L crisis. The RTC had fallen heir to all of the loans made by defunct S&L’s. Just to locate the full documentation on any loan on any property in that morass took several months, on average!! Hard to imagine coming up with the appropriate docs in all of the loans owned by Fannie, Freddie and the FED. Either improbable or nearly impossible.

  8. Bayard Waterbury:

    THIS IS THE ORIGINAL VERSION OF 1989. THE EXTENDED 1991 HARPER PAPERBACK IS GREATLY ELABORATED. With your comment above, I would think you might know this work?


    Full text of “Inside job : the looting of America’s savings …
    Inside job : the looting of America’s savings and loans / Stephen Pizzo, Mary Fricker, and Paul Muolo. p. cm. Bibliography; p. Includes index. …
    http://www.archive.org/stream/insidejoblooting00pizzrich/insidejo... – Similar

  9. Levitin’s testimony is interesting. He may be too pessimistic (from the point of view of mortgage servicers and sponsors) but he has two points right: this is not a matter that can be investigated quickly and the situation is such that an investigation will probably show extremely difficult to resolve problems with probably very large indemnity claims arising.

    Simple take-away: do not buy a house, and certainly not a foreclosed one in Florida and, do not buy a mortgage backed security unless you pay only a lottery ticket price for it.

    Would this not be the biggest financial problem the world has ever seen, only from the point of view that the capacity does not exist to measure its extent and that while it is dynamic as well?

    Forget Ireland, Greece, etc. This will occupy lawyers for the next 15 years and freeze large residential markets also for a long time, unless adequate laws at state and federal level create gvt guarantees for both buyers of real estate with uncertain titles (millions of them) and investors/buyers of mortgage related securities. Since it is unlikely that that happens (and the budgetary consequences), this big mess will only grow.

  10. And Levitin:

    “Rescission would mean that the securitization sponsor would have the notes and mortgages on its books, meaning that the losses on the loans would be the securitization sponsor’s, not the MBS investors, and that the securitization sponsor would have to have risk-weighted capital for the mortgages. If this problem exists on a wide-scale, there is not the capital in the financial system to pay for the rescission claims; the rescission claims would be in the trillions of dollars, making the major banking institutions in the United States would be insolvent.”

  11. Thank you, Mr. Kwak, for the link to Professor Levitin’s testimony which I have read. Despite coming from a medical vs legal background, I now grasp the depth and gravity of this unfolding crisis thanks to Prof. Levitin’s erudite testimony.
    Yet again, following the “money trail” of those who financially benefit from short cuts is most revealing. The Rule of Law— is it to be pronounced DOA in the US?

  12. @Bruce: “Until we get prosecutions for what has happened to America, there is no justice in America.”

    I hate to be cynical, but we GOT prosecutions in the S&L crime spree of the 1980s. What eventually followed? The dismantling of most meaningful financial regulation in the 90s, thanks to Bill Clinton and buddies.

    Bill Black, who sent some of those S&L thugs to prison, writes continuously and passionately about this. One of his books from the 90s is “The Best Way to Rob a Bank is to Own One,” but he’s still agitating on Huffington Post and elsewhere.

  13. Some prosecutions did happen from the S&L “Swindle” but most of the real perpetrators (or better perper-traitors) got clean away and the money trail was completely obscured. The true negligence is that the same formula and strategy (…http://www.scribd.com/doc/135…) is played out again over the next two decades when hard ball deregulation became a mantra for the free wheeling politics of market looting disguised as free enterprise ideology.

    But Carla…I am more than cynical but not about to “capitulate to this recapitulating SCAM.” You seem to be saying it is worthless to fight it since no one succeeded in the past. In fact, William Black is not the only American Hero that suffered during the earlier version of this scam, he’s simply the most pronounced survivor. The problem is that we never understood the scope and scale of this because it remains a politically controlled whitewash and cover-up. The problem is that we didn’t get involved enough! The problem is a gamed set-up based upon secrecy, abuses of power station, status and authority and academic items like “asymmetrical information” that served corruption and moral hazard as well as perverted incentives of secial vested interests. We neglected to keep accountability on those entrusted to protect us. We failed to be involved because we were not “specialists” and permitted ourselves to be intimidated by overwhelming authoritarianism and denial of access to critical information. You blame Clinton but ignore the entire league of criminal activity. Witting and unWitting collusion appears with a high pressure tactic of isolating and ostracizing the honest individual…and we still call THAT “whistle-blowing” with a negative connotation still ingrained as essentially some level of “squealing” that is a high risk social and career blunder. All these things and more go into the implications of your sense of hesitancy.

    But most of all, Carla, I am not talking about prosecutions for S&L swindles of the past.

    AGENCY TO ASSESS CRIMINALITY FROM 2006 – 2010 IN REAL TIME. I SPECIFICALLY MEAN PROSECUTION TODAY FOR CRIMES LEFT UNMENTIONABLE AND DISGUISED AS A SYSTEMS FAILURE OF TBTF. This crisis is orchestrated and criminal and it is not a total systems capacity failure. We need to stand up as a “PEOPLE” and basically demand a criminal investigation (not another insider commission please…) and prosecution for corruption. The new norm has to be people involvement and they need to start having a voice. It is high time that we all stand up and be counted; Hands off our Junk!

  14. http://www.opensecrets.org/news/2010/10/jpmorgan-chase-prevails-in-lobbying.html

    * Commercial banks,
    * Finance,
    * Heavy Hitters,
    * Industries,
    * Influence & Lobbying,
    * Lobbying,
    * Securities & investment


    * American Bankers Association,
    * bailout,
    * Bank of America,
    * Center for Responsive Politics,
    * Chamber of Commerce,
    * Chrysler,
    * Citigroup,
    * commercial banks,
    * finance sector,
    * Goldman Sachs,
    * Heavy Hitters,
    * JPMorgan Chase,
    * Lauren Hepler,
    * lobbying,
    * Morgan Stanley,
    * OpenSecrets Blog,
    * OpenSecrets.org,
    * securities and investment industry,
    * Wells Fargo


  15. Bruce, actually I agree with you 100%.

    I did not mean to imply that it is worthless to fight this; only that it is hard, and we have to remain ever-vigilant.

    I am trying to stand up and be counted, but in the wider world (outside of this blog and some isolated local groups), I don’t seem to have a lot of company. How can we move forward in this battle–together?

  16. Carla:
    Thanks for your comment and responses. I think that we need to get real information out and this blog and others that allow open dialogue and sharing resources are really the major conduit to a united appeal to justice and reason. Conversation is great sharing, but we need to actually do some hard researching and share that with others with an honest open minded process of building foundation and more discovery. Remember that there really are people out there who know much more than they are willing to share; primarily because it is risky and vulnerable to expose a position that has been carefully programed for reduction and isolation to those who go it alone. We need to set a collective support network to bring these people out and provide a social recognition of gratitude for doing so. No one is going to self destruct on a path dependent ratio between right and wrong! We need to set a social tone of acceptance and give incentive to these special peers. I think that the job of most of us:

    For the average person who is more tired of being an unwitting pawn… Yes…it is frustrating, possibly redundant and often thankless; not to mention prone to some degree of error…, but it is honest and is a continuous learning system with a feedback loop to honest & open/ social media growth. We have forgotten that WE are the People. We must not allow the power of money to take over our system of democratic rule.(check this profile of American History and tell me we don’t have an obligation to our heritage:

    Paraphrasing Benjamin Franklyn : anyone who trades liberty for security will HAVE NEITHER, and will end up getting what they deserve: Nothing at all!

  17. So here’s a question – say you have a normal mortgage that is not in jeopardy but you know has been sold to say CitiMortgage, should you worry that when you finally pay the mortgage off that you are going to have title issues?

    I mean if because of MERS etc. they’ve been throwing away paperwork, are homeowners going to have problems tracking down proper proof of ownership (title) when the lone is finally (and normally) closed (paid off)?

  18. “This suggests that the best course of action is a global settlement on mortgage issues”

    While I understand it may be necessary, given regulatory capture this is scary. My guess is the government is going to effectively absolve the mortgagees here at the loss of the borrowers, perhaps with some token concessions.

    The government will do this on the (blackmail) threat that otherwise we’ll have a 2008 meltdown again…

  19. When social moods darkens along with the continued transfer of wealth and wellbeing to millionaires and billionaires, the implosion will begin in ernest, making present Tea Party politics seem like a tempest in a teapot.

  20. Take a look at how ludicrously inflated their level of pay is above that of the average worker, then get back to me on why they’re out of touch with reality.

  21. Bruce E. Woych’s reference to a book called “Greed and Good” (above) led me to a web site you might like, 3-D, if you don’t know of it already: http://www.toomuch.org.

    Excellent! Thank you, Bruce–and all–for your comments. I learn so much from this blog.

  22. Anonymous- interesting posit- I fear total darkness has yet to fall, and, when it does, perhaps it will be too late.

  23. WOW! Carla, WOW ! This should be mandatory viewing for every person in the country. Unfortinately, its only the tip/top of the Iceberg. The cold war political machine turned on the domestic political economy to seize power over the past three decades and frankly, the whole systemic corruption is enmeshed throughout the institutions that are running our country and control our survival. The new propaganda of “austerity” needs (all of a sudden) and the commission releasing an attack on Social Security and
    entitlements” (rhetorically vulnerable) is a direct assault on American independent citizenship. It will render and reduce Americans to market path dependency, desperation strategies and survival entrapment. One has to wonder if the executive branch of our Nation has not been a product of capture and succession planning to facilitate and sustain such fraud at these levels

  24. The “entitled” in this country are the elites, and we should start referring to them as such.

    They feed on the rest of the population and have the nerve to sneer at our frayed and inadequate safety net as “entitlements” “we” can’t afford.

    No, what WE can’t afford is our entitled ruling class.

    I don’t even have cable TV so have never watched Ratigan myself, but I do look online regularly to see what Bill Black is doing. He’s been calling it like it is for years.

  25. I’ll say it again – no one has power over you that you did not give them.

    So We the People DID give the “power” of justice, the Rule of Law, to our elected Representatives and look at what they are doing with “power”.

    The Government is the source of force and fraud against the individual – and they have an army of wanna-be HOOLIGANS (male and female and everything in between).

    Here is the SPIRIT of the Law that the creepozoid robo-“judges” PROTECTING the “entitled” criminals on a case by case basis IGNORE…


    That’s the JUDICIAL answer to their “contract” argument – there was HIDDEN FRAUD in the origination of that freekin’ sacred contract to begin with – and the robo-stamp judges KNOW it.

    That is the ONLY role of “government” that will ever be acceptable to a SANE, EDUCATED, and COMMON SENSE driven MIDDLE CLASS – that’s OUR “values” – we get to keep the fruit of our labors through a government who has only ONE reason to exist:

    Protect the INDIVIDUAL against force and fraud.

    That is NOT what we have now (how much reams of PROOF have we listed just on this blog) and we DO have a MORAL OBLIGATION to protect our INDIVIDUAL selves against force and fraud.

    It’s the MILLIONS of hooligans – yes, the neighbor with a “job” ripping YOU off via the Patriot Act “secrecy”

    that are within our mano et mano reach – and THEY HAVE TAKEN THE FIRST SHOTS…

    Funny how even though this was a year of the census, and trading on Wall Street is done in nano-seconds

    where is the DATA about real unemployment and how many people are in concentration camps for the “foreclosed” paying exorbitant “rent” for a space a little bigger than a coffin and paying rent for the fact that they have a BODY?

    It’s a logically LUDICROUS situation – isn’t it?


    And before the trolls come out to say ignorance of the “law” is no excuse

    You can’t use that argument either in this case because the Federal Reserve Board operates IN SECRET – they can’t be audited – but YOU can

    and all this access to figure out how to corral MILLIONS who were doing the same thing with their personal finances into the wood chipper all at once


    It certainly WAS a “cheap” war FOR THEM, wasn’t it?

    Hell, it was a LUCRATIVE WAR, as usual…

  27. A LESSON FROM IRELAND ABOUT TELLING IT LIKE IT IS !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


    Irish Minister Suffers Humiliating Take-Down on Prime-Time Television Over Handling of Financial Crisis


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