Friday, February 1, 2013

Private Consultants Pocket Your Money

Semantics are key in governmental nomenclature.  Bribery is known as “lobbying”.  Siphoning off government money is known as “privatization.”

Because, theoretically, regulatory agencies like the Office of the Comptroller of the Currency do “not have the resources to ensure thatbanks follow the rules,” the agencies hire outside private contractors who are supposed to clean up major foreclosure problems such as mass wrongful evictions.

But just as with the credit ratings agencies like Standard & Poor’s, Moody’s and Fitch, who gave gold standard triple A ratings to mortgage-backed securities collateralized by liar loan pooled mortgages, the private contractors are paid by the banks they are supposed to be regulating.  There is little oversight.  In many cases, they are enabling the banks to cover up their crimes and collecting huge fees which are taken out of settlements that are supposed to go to aggrieved homeowners:

Over 14 months, the consultants collected about $2 billion in fees, according to regulators and bank officials.  Those fees amounted to more than half of what the homeowners will receive under the $8.5 billion settlement that ended the “flawed foreclosure review run by 8 consulting firms.”  As part of the deal, officials will disburse $3.3 billion to 3.8 million borrowers in foreclosure.

Who are these private consultants and how can I get into the action?  It’s part of the revolving door in Washington.  Consultants like PricewaterhouseCoopers employ many former Securities and Exchange Commission officials:

They won much of the foreclosure review work, signing deals with four banks, including Citigroup.  Promontory, the firm examining loans for Wells Fargo, Bank of America and PNC, was founded in 2000 by the former head of the Comptroller of the Currency, Eugene A. Ludwig.

So what’s wrong with that, you may think.  At least their employees are knowledgeable in ferreting out bank wrongdoing.  But the consultants and the banks collaborate in covering up criminality.  Hired by HSBC to investigate money laundering allegations, Deloitte and Touche generously undercounted the number of suspicious transactions:

Deloitte has also been suspected of helping institutions cloak illicit transfers of money to rogue nations around the globe.”

Since the financial crisis, the comptroller’s office has issued nearly 20 enforcement actions against banks that had already hired consultants to help iron out problems.

Instead of exposing foreclosure abuses, private consultants are enabling the banks to hide their criminality.  They get paid huge fees which come out of the hide of wronged homeowners.  In the Washington bubble, money and personnel circulate back and forth.

Doesn’t it seem like privatizing government functions is really a way to siphon taxpayer money from the 99% to the 1%?  Follow the money and the cow pies.

1 comment:

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