All posts by tedlieu

Uncategorized

Sen. Ted Lieu hails feds seeking $1 billion from Deutsche Bank for its role in economic crisis

3 Comments

(Sen Lieu has been a leader on the mortgage crisis. – promoted by Brian Leubitz)

By Sen. Ted W. Lieu

D-Torrance

For those who may have missed, there was some good news coming out of Washington, D.C. and it did not involve Osama Bin Laden or the fact that our president was indeed born in the U.S.

Instead, it’s the fact the federal government is seeking more than $1 billion from Deutsche Bank for its role in the current U.S. financial crisis, kicking off the worst recession since the Great Depression.  

It is about time. This lawsuit by the federal government against Deutsche Bank sends the message to Wall Street institutions that engaged in fraud and reckless behavior that they finally are going to be held accountable.  

The bipartisan US Senate Investigation into what caused the financial crisis concluded that Deutsche Bank made mortgage loans knowing they were going to fail, misled investors about the quality of the loans and lied to the federal government.  

While I want Wall Street and all businesses to prosper, because that is how we turn our economy around, we cannot turn a blind eye to fraudulent, reckless and potentially criminal behavior. Greed and insane bonuses are not a defense to violating the law.

As the author of several measures signed into law that prohibit certain sub-prime loan practices, I understand that consumers need their confidence restored. Punishing those responsible for this mess is a good start. The free market already took care of several Wall Street firms that lied and engaged in unconscionable behavior.  Some of those financial institutions no longer exist, and for good reason. Deutsche Bank also had the additional hit to its image when they were sued Tuesday by the Los Angeles City Attorney for being a giant slumlord. Hmm. It seems Deutsche doesn’t want to follow either federal or state laws.  

More work remains. There are some existing financial institutions that engaged in fraud, cheating and lying during the mortgage boom years, and the government is finally sending the message that we are coming after you.  Justice will be done.

For more, visit Lieu’s Web site at the address below.

Ted W. Lieu represents nearly 1 million residents of Senate District 28, which includes the cities of Carson, El Segundo, Hermosa Beach, Manhattan Beach, Redondo Beach and Torrance, as well as portions of Long Beach, Los Angeles and San Pedro. For more, visit www.senate.ca.gov/lieu.

Uncategorized

Bipartisan U.S. Senate report identifies culprits of financial crisis

7 Comments

Nowhere in the report are the words “union,” “collective bargaining” or “workers ‘rights” mentioned.

A bipartisan federal investigative report has affirmed what many on Main Street have known for quite some time: Our financial crisis and resulting recession occurred as a result of risky, unethical and likely criminal behavior by reckless Wall Street institutions and the regulators that failed to stop them.

The panel singles out in particular Goldman Sachs, Washington Mutual, Credit Reporting Agencies and the Office of Thrift Supervision (OTS).  A fitting punishment for Washington Mutual and OTS’ inexcusable behavior is that they no longer exist.  

The panel concludes Goldman Sachs deceived Congress, investors and the public when they shorted the housing market in 2007.  Goldman Sachs should be ashamed for betting against America.  Goldman Sachs wanted the housing market to fail in spectacular fashion because that way they would receive spectacular profits for their company.  I guess this must be what Goldman Sachs’ CEO meant when he said his company was doing God’s work.

It is high time those responsible for this financial crisis be held accountable, both civilly and criminally.  I commend the panel for making referrals to the Department of Justice for criminal investigations.  I also commend the 19 recommendations the panel made to help ensure a crisis like this does not happen again.

This bipartisan report also puts into context the current budget battles waging in California, Wisconsin, and Washington, D.C.  Nowhere in the report are the words “union,” “collective bargaining” or “workers ‘rights” mentioned.

It was AIG, not SEIU, whose excessive risk taking resulted in the largest taxpayer-bailout in U.S. history.  

It was Countrywide Home Loans, not the California Teachers Association, whose fraudulent and deceptive practices resulted in millions of foreclosed homes.

And it was Lehman Brothers, not the Labor Federation, whose bankruptcy started a Wall Street collapse that brought America’s economy to its knees.

Clearly, we need to be vigilant against those who want to revise history and inappropriately place blame where it does not belong.

As we proceed forward during these difficult economic and budget times, it is important that we be informed by what brought about this crisis and to learn from history, and not stand by and allow it to be repeated.

Sen. Ted W. Lieu, D-Torrance, is the author of two landmark mortgage and foreclosure reform laws: The California Mortgage Reform Act and the California Foreclosure Prevention Act.  He also chairs the Senate Committee on Labor and Industrial Relations. For more, visit his Web site at www.senate.ca.gov/lieu

Uncategorized

A New Sheriff Is Coming To Wall Street

The wild unregulated excesses of Wall Street are over.  I commend the Obama Administration for coming up with a solid package of reforms that will help ensure a financial crisis of this magnitude never happens again.  No longer will banks and Wall Street executives be able to pawn off inherently dangerous financial products without adequate disclosure onto an unsuspecting public.

In addition to strengthening the regulatory authority of the Federal Reserve and the Treasury, one of the major reform proposals is the creation of the Consumer Financial Protection Agency (CFPA).  The CFPA will have the authority to ensure consumer protection regulations are written fairly and enforced vigorously.  This new Agency will reign in Wall Street’s excesses and make sure consumers are protected.  Just as the Consumer Product Safety Commission protects us from harmful products, the CFPA will protect the public from harmful financial instruments by ensuring they are regulated appropriately.

The Obama Administration-in contrast to the Bush Administration-recognizes that solving Wall Street’s excesses requires a multi-layered approach, including the strong involvement of states.  The proposed reforms specifically state that the CFPA’s strong rules would serve as a floor, not a ceiling, and would not pre-empt stronger state laws.  The Administration specifically advocates that states have the authority to adopt stricter laws for institutions of all types, regardless of charter, and to enforce federal law concurrently, regardless of charter.

That is why Assembly Bill 260 (Lieu), California’s landmark mortgage reform bill, needs to be passed by the Legislature and signed by the Governor.  AB 260 bans the worst predatory practices in the subprime loan industry and complements the Obama Administration’s reform proposals.  Working together at both the state and federal level, we will ensure that Wall Street will never again bring American’s financial system, and our economy, down to its knees.

Uncategorized

Wall Street Banks Need To Stop Using Funny Math

2 Comments

(Say Hi to Asm. Lieu. NPR’s Planet Money podcast did a good report on this subject as well. – promoted by Brian Leubitz)

Two weeks ago, Bank of America surprised Wall Street by posting an alleged ‘strong’ profit of $4.2 billion the first quarter of this year. Now we know how they arrived at those numbers:  funny math. Today we learned that Bank of America actually needs another $34 billion injection of capital in order to survive. 

Bank of America is not the only firm using funny numbers.  Goldman Sachs posted an alleged profit of $1.8 billion for the first quarter of 2009.  The company had previously followed a calendar quarter that ran from December to February.  However, Goldman Sachs conveniently and suddenly decided to change its accounting to a calendar year schedule, and changed their fiscal year to start in January, effectively eliminating December’s results.  The company had suffered large losses in December.  So the ‘profit’ Goldman Sachs posted doesn’t account for the entire missing month of December.

 

Funny numbers, lack of transparency, and the obscuring of risk were some of the prime causes of Wall Street’s economic collapse, a collapse that started our recession.  America’s recession will be prolonged if investors continue to stay on the sidelines because they are unable to ascertain the true value of banks and other companies.  

It is time for Wall Street firms to come clean and start telling Americans the truth.

Uncategorized

Hello, I’m Assemblymember Ted Lieu, and I look forward to this town hall.

39 Comments

(Please welcome Assemblymember Ted Lieu to Calitics.  UPDATE: Ted had to run to the floor for a vote but he will come back at some point to respond to any questions he missed. – promoted by David Dayen)

I want to thank Calitics and the community for this opportunity to interact and discuss some of the most pressing challenges facing us today.  As some of you may be aware, I authored the California Foreclosure Prevention Act, which passed the legislature and was signed into law despite massive Wall Street opposition.  I would be happy to discuss the mortgage and foreclosure crisis and any other issues you have.

UPDATE:  It is 12:25 pm and I need to go to the floor of the Assembly now.  Thank you very much for your great questions.  I really appreciate the public service Calitics provides in disseminating vital, timely, and Democratic information to our residents in the greatest state on earth.

Uncategorized

Fannie Mae Executives Who Accept Bonuses Should Be Fired

1 Comment

(Move over, AIG, this is the next outrage. – promoted by David Dayen)

Fool us once, shame on you.  Fool us twice, shame on us.  Given the intense public backlash against the shameful AIG bonuses, it is unthinkable that Fannie Mae would now award million dollar bonuses to four of its top executives.  According to recent news reports, Executive Vice Presidents Kenneth Bacon, David Hisey, Michael Williams, and Thomas Lund will each receive over $1 million in bonuses.  This is unacceptable.

Let’s not forget that Fannie Mae failed last year.  At least $15 billion of precious taxpayer dollars have been injected into Fannie Mae to keep it afloat, and hundreds of billions more are being used to guarantee their loans.  We fire executives for bad judgment.  It is beyond bad judgment for any of Fannie Mae’s executives to accept their million dollar bonuses.  There are many Wall Street executives without a job right now who will happily take top positions at Fannie Mae without the need for million-dollar bonuses.

Fannie Mae executives should already be on thin ice for coming out with guidelines that reward speculators and investors.  The Fannie Mae guidelines issued on March 4, 2009 allow speculators with second homes and investment properties to take advantage of the refinancing component of President Obama’s Making Home Affordable plan.  This directly contradicts President Obama’s repeated statements that his plan will not reward speculators.  Fannie Mae needs to follow the President’s public statements and revise the guidelines immediatley.

We need to clean house on Wall Street.  We need a cultural change where taxpayer interests are placed above corporate greed; where homeowners’ interests are placed above speculators’ interests; and where common sense prevails over utter stupidity.  

I call on Fannie Mae executives to return any bonuses they receive while their company is being propped up by taxpayer dollars.  If they do not, they should be fired.

Ted W. Lieu (D-Torrance) is Chair of the Assembly Rules Committee and former Chair of the Assembly Banking and Finance Committee.  He is the author of the landmark California Foreclosure Prevention Act, which was signed into law last month.

California

New Foreclosure Data Makes Us Ask: When Will We Stop The Insanity?

1 Comment

(Assemblyman Lieu has been a leader on the foreclosure issue.  Welcome him to Calitics. – promoted by David Dayen)

        Albert Einstein once said that insanity is doing the same thing over and over again and expecting a different result.  Wall Street and Treasury Secretary Henry Paulson have continued to ignore the home foreclosure problem, despite clear and urgent warnings from consumer groups, legislators, and regulators.  Virtually none of the $8.5 trillion in federal taxpayer bailout commitments is directed towards helping reduce foreclosures.   So it should come as no surprise that new data from the Mortgage Bankers Association shows that foreclosures have increased 76% compared to a year ago to hit yet another record high, with a record 1 in 10 Americans now experiencing mortgage trouble.

The problem is particularly acute in California, which accounts for one-third of the nation’s foreclosures.  California alone has 54 percent of all foreclosure filings on adjustable rate loans.  

         Despite the massive foreclosure meltdown, Wall Street and Treasury Secretary Paulson continue to believe a top-down solution of injecting taxpayer bailout money to private Wall Street companies will somehow help our economy.  How does giving hundreds of billions of dollars to large banks so that they can gobble up other smaller banks help homeowners?  How does injecting AIG with $150 billion of taxpayer funds help keep distressed homeowners in their homes?  The answer is those solutions do nothing to address the core problem of unmitigated foreclosures.    

        It is precisely the record number of home loan defaults that is causing the current credit and liquidity crisis.  AIG and numerous other Wall Street institutions collapsed because of rising home loan defaults, not the other way around.  It is insane to keep pouring federal taxpayer money down the Wall Street sinkhole while doing nothing to help reduce foreclosures.  None of Treasury Paulson’s solutions to benefit Wall Street have helped the problem; his solutions have only made our economy worse off.  We cannot keep doing the same thing expecting a different result.  

         It is time for Treasury Secretary Paulson to listen to Federal Reserve Chair Ben Bernanke and FDIC Chairwoman Sheila Bair, both of whom are calling for loan modifications to keep people in their homes.  Bernanke and Bair have been far more prescient, insightful, and rational than Paulson has been.  Until we change our policies, home foreclosures will continue to rise, Wall Street firms will continue to collapse, and our economy will continue to suffer.        

         Wall Street banks should also be ashamed of themselves for not only opposing past attempts to reform the mortgage market, but also current attempts to help alleviate the foreclosure crisis.  The California Foreclosure Prevention Act sets a 90 day foreclosure moratorium unless the lender has a comprehensive loan modification program designed to keep people in their homes.  Wall Street should not only stop opposing this bill, they should embrace it because this is one of the solutions that might actually keep them from going out of business.

Ted W. Lieu is Chair of the Assembly Rules Committee and author of the California Foreclosure Prevention Act

Uncategorized

Enough is Enough

(Welcome Assemblyman Ted Lieu to Calitics!  And yes, enough is enough. – promoted by David Dayen)

“Enough is Enough”

Gordon Gecko in the movie Wall Street famously said, “Greed is good . . . Greed is right, greed works.”  Real life Wall Street, however, reminds us that excessive and unregulated greed wrecked havoc in the mortgage industry and took down our economy.  The core cause of the chaos in our financial sector was the unregulated selling of unsuitable and risky subprime home loans that resulted in a massive wave of foreclosures.

During the mortgage boom, industry players became addicted to the drug of high-yield, adjustable rate subprime mortgages that they foisted on borrowers.  Raking in massive quarterly and annual bonuses, corporate executives didn’t care if borrowers could repay the mortgages a few years later.  It was greed on speed, the future be damned, and now all of us are suffering the consequences.  

More in the extended entry….

The collapse of financial giants Lehman Brothers, Ameriquest, IndyMac Bank, and New Century Financial; the fire sales of the venerable Merrill Lynch, the lawsuit-challenged Countrywide, and WaMu and Wachovia; and the existing taxpayer bailouts of AIG, Bear Stearns, Fannie Mae, and Freddie Mac would NOT have happened if effective laws were in place to prevent predatory and unsuitable home loan products and practices from occurring in the first place.  

Former Federal Reserve Chairman Alan Greenspan contributed to the financial meltdown by taking actions that artificially inflated the housing bubble; promoting risky, adjustable rate mortgages; and worst of all keeping government from effectively regulating the mortgage industry.  In hindsight his decisions were absolutely and categorically wrong in every way possible.  

While we wait for Mr. Greenspan to apologize, his successor, Federal Reserve Chairman Ben Bernanke, and Treasury Secretary Paulson have unveiled the largest government intervention in the free market in the history of the world.  Taxpayer bailouts of large corporations do nothing to reform the broken mortgage system.  While we may be forced to do a short-term fix, ultimately what is needed is fundamental reform.  

Several states have passed effective laws to prevent predatory practices and the making of bad loans.  California’s legislature put on Governor’s Schwarzenegger’s desk AB 1830 (Lieu), a comprehensive subprime mortgage reform bill.  This bill, which received bipartisan support, bans predatory subprime loan practices and exotic, overly risky and unsuitable loan products.  Unfortunately, Governor Schwarzenegger catered to a few special interest groups in the mortgage industry and vetoed AB 1830.

Despite Governor Schwarzenegger’s mistake, there is an opportunity nationally for fundamental reform.  If the Bush Administration wants to use your hard-earned money to bail out Wall Street, then taxpayers should demand major industry reforms.  First, industry should agree that they will no longer fight mortgage reforms such as those contained in AB 1830.  Second, industry should agree to fix executive compensation so that the Gordon Geckos of Wall Street are not incentivized to place short-term profits above long-term financial health.  

Third, we need to slow down the number of foreclosures and stabilize home prices or the problems will get even worse.  This can be done by granting bankruptcy judges the ability to modify loans on the borrower’s place of residence, and by following the Federal Deposit Insurance Corporation’s lead of imposing a foreclosure moratorium.

Approximately 1,300 foreclosure filings occur every day in California, the worst in the nation.  By the time you finish reading this article, another foreclosure filing would have occurred.  This is unacceptable and has to stop.  

If we are going to give massive corporate welfare to banks, then taxpayers better get something in return.  It is time to reform the mortgage industry and Wall Street.  Enough is enough.

Assemblymember Ted W. Lieu represents the 53rd Assembly District.  Prior to his elevation to Chair of the Assembly Rules Committee, he was Chair of the Assembly Banking and Finance Committee.