No, the banks have not found religion.
- Joshua M Brown
- May 31st, 2012
Bloomberg reporter Bob Ivry has a fantastic story up about the whistleblower from Citigroup’s mortgage factory who just sued her old employer for fraud. They were still trying to bury the truth about how rampant the problems were and coerce her into submission as recently as 2011.
She received $30 million of the total $158 million settlement (the Justice Department piggybacked onto her case).
The most startling thing is that four years after the crash, no one’s learned anything. Check this out:
By 2006, the bank was buying mortgages from outside lenders with doctored tax forms, phony appraisals and missing signatures, she says. It was Hunt’s job to identify these defects, and she did, in regular reports to her bosses.
Executives buried her findings, Hunt says, before, during and after the financial crisis, and even into 2012.
In March 2011, more than two years after Citigroup took $45 billion in bailouts from the U.S. government and billions more from the Federal Reserve — more in total than any other U.S. bank — Jeffery Polkinghorne, an O’Fallon executive in charge of loan quality, asked Hunt and a colleague to stay in a conference room after a meeting.
The encounter with Polkinghorne was brief and tense, Hunt says. The number of loans classified as defective would have to fall, he told them, or it would be “your asses on the line.”
Hunt says it was clear what Polkinghorne was asking — and she wanted no part of it.
Neil Barofsky sums it up really well later in the piece:
Citigroup behaving badly as late as 2012 shows how a big bank hasn’t yet absorbed the lessons of the credit crisis despite billions of dollars in bailouts, says Neil Barofsky, former special inspector general of the Troubled Asset Relief Program.
“This case demonstrates that the notion that the bailed-out banks have somehow found God and have reformed their ways in the aftermath of the financial crisis is pure myth,” he says.
The whole story is pretty amazing, make time to read this today.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.