From the daily archives: Thursday, August 21, 2014
Washington, D.C. ~ Thursday, August 21, 2014

Thank you, Mr. Attorney General, and thank you all for being here this morning.

This morning we demonstrate once again that no institution is either too big or too powerful to escape appropriate enforcement action by the Department of Justice.  At nearly $17 billion, this resolution with Bank of America is the largest the Department has ever reached with a single entity in American history.

But the significance of this settlement lies not just in its size; this agreement is notable because it achieves real accountability for the American people.

In addition to the billions of dollars the bank will pay, Bank of America has agreed to sign a statement of facts, in which it admits publicly its repeated failure, and the repeated failures of its affiliates Merrill Lynch and Countrywide, to disclose to investors key facts about the actual quality of the loans they packaged up into residential mortgage backed investment securities, or RMBS.

The statement of facts details evidence we uncovered in three separate investigations conducted by U.S. Attorney Anne Tompkins of the Western District of North Carolina; the Central District of California, represented by Acting U.S. Attorney Stephanie Yonekura; and the District of New Jersey, led by U.S. Attorney Paul Fishman, whose case largely drove the discussions that led to the resolution we announce today.  His investigation found that Merrill Lynch knew, based on its own due diligence, that substantial numbers of the loans it was packaging into RMBS and selling to investors failed to meet underwriting guidelines, did not comply with the applicable law, or were inadequately collateralized — all contrary to representations Merrill was making to investors.

The cases in California and North Carolina, involving Countrywide and Bank of America, respectively, also involved similar conduct with varying degrees of egregiousness.  All, however, involved Bank of America or its affiliates saying one thing to investors about the quality of the loans they packaged into RMBS yet in reality knowing the facts indicated something quite different.

It’s kind of like going to your neighborhood grocery store to buy milk advertised as fresh, only to discover that store employees knew the milk you were buying had been left out on the loading dock, unrefrigerated, the entire day before, yet they never told you.

And just like you might be in for an unpleasant surprise when you got home and poured yourself that glass of milk, investors — such as public pension funds and federally-insured financial institutions — were unpleasantly met with billions of dollars in losses when those securities investments soured.

Now, importantly, the statement of facts doesn’t end with the Bank’s admissions about its securitization of risky mortgage loans.  The statement also achieves accountability by requiring Bank of America to accept responsibility for faulty loan origination practices that, in many cases, resulted in misrepresentations about the quality of those loans to Fannie Mae, Freddie Mac and the Federal Housing Administration, and contributed to the loss of hundreds of millions of dollars in taxpayer funds, as uncovered in investigations conducted by U.S. Attorney Loretta Lynch and her office in the Eastern District of New York, as well as U.S. Attorney Preet Bharara and his office in the Southern District of New York.

Taken together, these RMBS and loan origination cases have contributed to a civil penalty of $5 billion, as reflected in this settlement — the largest civil penalty in history.

Yet in addition to accountability, this historic resolution is also significant for what it achieves in terms of restoration:  it requires those we are holding accountable to shoulder some of the responsibility for repairing the damage caused by their conduct.

In this case, that’s achieved by the $7 billion in consumer relief the Attorney General mentioned just a moment ago.  This is one of largest consumer relief packages we have ever assembled with a single financial institution, and its impact could benefit hundreds of thousands of Americans still struggling to pull themselves out from under the weight of the financial crisis.

Some of the key consumer relief measures include:

·          Affordable rental housing, where Bank of America will provide millions in financing for affordable rental housing, with a focus on family housing in opportunity areas — one of the most critical needs in housing today.

·          Community reinvestment and neighborhood stabilization, where the Bank will invest at least $100 million in community development funds, legal aid organizations, and housing counseling agencies.  In some areas, Bank of America will donate vacant properties to non-profits, along with cash that will enable those non-profits to make productive use of those properties — something that can help bring vibrancy back to dormant neighborhoods challenged by abandoned buildings.

·          And perhaps most important, there will be significant loan modification, where the Bank will provide certain homeowners with mortgage principal reductions that will bring their loan-to-value ratios down to 75 percent, along with a permanent interest rate of 2 percent.

Let me give you a quick example of what that looks like.  Imagine a distressed homeowner who owes $250,000 on her mortgage, but she’s underwater because her house is only worth $150,000.  Under this consumer relief plan, her mortgage principal would be reduced to just over $112,000 — over $137,000 worth of mortgage debt would be forgiven, her monthly mortgage payments would be cut dramatically, and her house would be transformed from a liability into an asset with equity.

One other form of relief the Attorney General mentioned merits emphasis.  Before Congress allowed the Mortgage Forgiveness Debt Relief Act to lapse at the end of last year, consumers who received the type of relief I just described weren’t liable for any federal taxes they might owe on the consumer relief they received.  But now, the Act is no longer in effect, and until it’s extended, consumers will be responsible for paying the taxes on any consumer relief they receive.

So to help consumers defray that federal tax liability, we negotiated as part of this settlement a 25/25 Tax Relief Fund.  Here’s how it works:  once a consumer receives relief, such as a principal write-down or mortgage forgiveness, 25% of the value of that relief will be made available to help offset any tax liability that may be incurred by the consumer, up to $25,000.

Now, this will help tens of thousands of consumers to offset, at least in part, any taxes that result from consumer relief they receive as a result of this settlement.  But it’s only a temporary fix; the fund isn’t large enough to cover every potentially affected consumer, which is why the best solution to this problem is for Congress to heed the Attorney General’s call to extend the tax relief coverage of the Mortgage Forgiveness Debt Relief Act.

Now, as I’ve said before, the consumer relief that’s offered as a result of this settlement won’t solve every problem or cure every ill created by the financial crisis.  But it will offer hope to hundreds of thousands of Americans who are still laboring under upside-down mortgages, or struggling in neighborhoods defined by boarded-up buildings, or fighting to avoid foreclosure for themselves and their families.

And that alone makes these efforts worth trying.  Which is why we’re not letting up and we’re not going away and why we’ll continue to pursue these cases either to litigation in the courts or to a significant resolution — whichever is in the best interests of the American people.

Today’s resolution would not be possible were it not for the extraordinary partnership that defines the collaboration with and among this Justice Department, our sister federal agencies and the community of state Attorneys General.  So my thanks to the FDIC; the Department of Housing and Urban Development; the FHFA-OIG; the SEC; and state Attorneys General Beau Biden of Delaware; Jack Conway of Kentucky; Doug Gansler of Maryland; Kamala Harris of California; Lisa Madigan of Illinois; and Eric Schneiderman of New York, who also co-chairs the RMBS Working Group and has been an active part of this work from the beginning.

One final note.  There are many who deserve recognition for the hard work they did to make today’s announcement a reality, but allow me just name a special few: Assistant U.S. Attorney Leticia Vandehaar, who was the driving force behind the Merrill investigation; the Director of the RMBS Working Group, Geoff Graber; Principal Deputy Associate Attorney General, Maame Ewusi-Mensah Frimpong; Counsel to the Associate Attorney General, Stacey Grigsby; and my Deputy Chief of Staff, Cindy Chang — thanks to all of them for their dedication and repeated all-nighters these last few weeks.

 

 


Powered by Guardian.co.ukThis article titled “Former top general calls on Obama to wipe out Isis in wake of Foley killing” was written by Spencer Ackerman in New York and Dan Roberts in Washington, for The Guardian on Thursday 21st August 2014 17.42 UTC

An influential retired US general has called on Barack Obama to order the destruction the militant group responsible for murdering American journalist James Foley amid conflicting views in the administration on how to respond to the atrocity.

As Obama’s foreign policy team debates expanding its renewed air war in Iraq after the killing of Foley by the Islamic State (Isis), John Allen, a retired marine general who commanded the Afghanistan war from 2011 to 2013, urged Obama to “move quickly to pressure its entire ‘nervous system’, break it up, and destroy its pieces.”

Allen’s argument, presented in an op-ed for the DefenseOne website, echoes remarks by secretary of state John Kerry and comes amid internal dispute in the Obama administration over the future course of its two-week air war in Iraq. Much diplomatic effort is said to be spent broadening and hardening a region-wide effort against Isis, something Allen endorsed, with Turkey and Qatar being a particular near-term focus for Kerry.

The debate is said to be fluid. At present, a US official anticipated more continuity than change in future military operations against Isis, but said: “It may ultimately evolve.”

On Wednesday, six new airstrikes continued to hit Isis positions near the Mosul Dam, three days after Obama declared that it was no longer under Isis control. Nearly two-thirds of the 90 US strikes since 8 August have taken place near the critical dam.

In a grisly video produced by Foley’s captors, his killer says Foley’s death came as revenge for US airstrikes in Iraq. Soon after the video was released, the US confirmed that it had recently mounted a failed rescue bid for Foley. Elite US military forces secretly invaded Syria earlier this summer in a mission that involved dozens of special operations forces from all US military services, including the 160th special operations aviation regiment.

US forces flew into Syria in defiance of air defence batteries that senior military officials have described as highly threatening to pilots. Modified Black Hawk helicopters were involved, and “armed fixed-wing aircraft and drones” provided cover to forces on the ground, said an administration official. No hostages were found at the targeted location.

It emerged on Thursday that Foley’s family received a message from Foley’s captors on 13 August, warning them that he would be killed. They passed the message on to the US government, which helped with a response. Phil Balboni, chief executive of GlobalPost, the Boston-based online news publication that had published work by Foley, told Reuters: “It was an appeal for mercy. It was a statement that Jim was an innocent journalist,” and that he respected the people of Syria, where he was held.

Foley’s family and friends hoped the militants were bluffing and wanted a ransom, he said. The group had last year demanded a ransom of 2m for his rescue, Balboni said.

Wary of overcommitment to a new Iraq war, the Obama administration has sent mixed signals about how far it is willing to go against Isis. Kerry, who has been hawkish against Isis, said the jihadist organization “must be destroyed/will be crushed”, a goal beyond the one Obama has thus far set.

Allen proposed attacking Isis in Syria as well as Iraq “across its entire depth”, an option the Pentagon has studied after the group overran Iraq’s second largest city in June but is yet to implement.

In an interview on Thursday with National Public Radio, one of Obama’s closest advisers opened the door for attacking Isis in Syria, which would represent a significant expansion of a bombing effort whose missions have slowly evolved.

“We would not restrict ourselves by geographic boundaries,” said Ben Rhodes, a deputy national security adviser. “We haven’t made decisions to take additional actions at this time.”

Rhodes indicated that the administration believes that the incoming government of Haider al-Abadi in Baghdad will aid US efforts in assembling and deepening an anti-Isis coalition. Rejecting a recent suggestion, Rhodes ruled out a rapprochement with Syrian dictator Bashar al-Assad to confront a mutual foe.

Writing for the DefenseOne website, Allen conspicuously praised Obama, who is wary of expansive promises made by the military. He did not propose a return to ground combat, but urged a “focused advise and assist” mission to bolster Iraqi and Kurdish soldiers and non-jihadist Syrian rebels, a commitment that would require a reintroduction of significantly more US military advisers.

Obama has ruled out US ground combat, preferring to rely on proxies, something his critics have not challenged, with memories of a bloody US occupation still fresh. The US official said working through vetted Syrian opposition groups and Iraqi and Kurdish forces “will continue to be the foundation of the US approach going forward”.

Though entire divisions of the Iraqi army fled from Isis in June, “they’ve shown a lot more capability in the last two weeks than in the previous two months,” the official said.

At the State Department, officials said the US is pressuring Qatar and Turkey to help cut off flows of financing and foreign fighters to Isis, even as they cautioned that they did not see evidence of either government supporting the extremist group officially.

“We are working with governments in the region where we believe there are private citizens funding [Isis] to get them to clamp down even further to cut off those sources of funding,” said spokeswoman Marie Harf.

“We need to attack [Isis] on a variety of fronts, one of which is the bombs that the Pentagon folks are dropping on them right now. One of them is not letting them have access to resources.”

Kerry also spoke directly to the Qatari foreign minister on Wednesday, during which Foley’s death was “likely” to have come up, according to US officials, although the call was primarily about Gaza.

Asked whether Qatar, Turkey or Saudi Arabia – another alleged source of funding – were “fully on board”, Harf responded: ”Well, look, we’re talking to them every day about what more we can all do. We know there’s more that needs to be done. We know this is a long-term fight, and we know it’s a tough one. So we’re having those conversations.”

Allen said Foley’s killing “embodies” the threat from Isis, which he called “an entity beyond the pale of humanity”. The US official said Allen’s article “serves a purpose in helping explain to the American people how dire it is”.

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James FoleyJames Foley went to the darkest of places to shine the light of truth. Nothing could stop him from sharing with the world the reality of what was happening on the front lines in Iraq and Afghanistan, or the struggle against a brutal dictator in Libya, and he was just as determined to do the same from Syria. He was brave and bold, and no masked coward can ever steal the legacy of this courageous American who lived out the meaning of the word journalism.

I was a Senator when James was first held in Libya, and we were first introduced to the Foley family. His family was as determined in working towards his release as James had been daring in covering those war zones himself. The sheer unfairness and unlikely odds that this young journalist would again find himself in captivity in another conflict was almost unimaginable. It is impossible to express how much we all wanted this latest horror to end with his family reunited, as it had been the first time.

Teresa and I, along with members of my family who got to know James’ mother Diane and his brother, are heartbroken for all of the Foleys. There are no words of condolence that can adequately convey our sorrow, our sympathy, or our anger for what has happened.

There is evil in this world, and we all have come face to face with it once again. Ugly, savage, inexplicable, nihilistic, and valueless evil. ISIL is the face of that evil, a threat to people who want to live in peace, and an ugly insult to the peaceful religion they violate every day with their barbarity.

We grieve for James Foley. We mourn for his family and his loved ones. We honor the courage and pray for the safety of all those who risk their lives to discover the truth where it is needed most. And make no mistake: we will continue to confront ISIL wherever it tries to spread its despicable hatred. The world must know that the United States of America will never back down in the face of such evil. ISIL and the wickedness it represents must be destroyed, and those responsible for this heinous, vicious atrocity will be held accountable.

 

August 21st Edition of the Holtville Tribune, Imperial Valley Weekly, and the Calexico Chronicle.

WEEKLY-CHRON SUN STD 01.qxd Tribune Weekly Chronicle 08-21-14

 
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