[Congressional Record Volume 156, Number 90 (Wednesday, June 16, 2010)]
[House]
[Pages H4573-H4575]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
UPDATE ON GOLDMAN SACHS
The SPEAKER pro tempore. Under a previous order of the House, the
gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
Ms. KAPTUR. Madam Speaker, please allow me to update my colleagues
and citizens across the country on some recent news about Goldman
Sachs, one of the white shoe Wall Street outfits that got bailed out by
the American taxpayer 2 years ago. We've learned that the Securities
and Exchange Commission and Department of Justice are looking into
Goldman Sachs, but there is more you should know.
Today, it was revealed that this privileged firm also wholly owned a
mortgage servicing company back from 2007. So it claims it had no
knowledge of the housing meltdown, but in fact, it owned a loan
servicing company.
Back in 2007, Goldman Sachs scooped up Litton Loan Servicing in
Houston, Texas. Litton specialized in collecting money from borrowers
in California and Florida. Goldman now services around 320,000 loans
worth around $50 billion according to the Financial Times.
Litton does not seem to be quite on the up-and-up. In fact, it was
just recently forced to settle a class-action lawsuit in Los Angeles
for over half a million dollars, and the Financial Times reports that
the Better Business
[[Page H4574]]
Bureau has listed almost 800 complaints on Litton. Worse, Litton has
only put up about 29 percent of their loans into permanent
modifications, leaving the rest of the consumers who tried to get one
trying to find money to make up the difference they immediately owe
Litton, and oh, of course, then they will owe the accrued late fees.
Goldman Sachs says little about this, of course. This is business as
usual for them, but bad business as usual it appears.
However, the customers of Litton are not the only ones receiving poor
services from Goldman Sachs. The Financial Crisis Inquiry Commission
created by Congress is getting similar treatment. Despite saying that
they will cooperate fully, Goldman Sachs is not cooperating fully with
the Financial Crisis Inquiry Commission. In fact, a subpoena had to be
issued last week to get documents from Goldman Sachs.
The New York Times quotes the chairman of the commission, Mr. Phil
Angelides of California, as saying the following: ``Goldman Sachs has
not, in our view, been cooperative with our requests for information or
forthcoming with respect to documents, information, or interviews.''
Should that surprise any of us? It certainly shows that Goldman Sachs
does not respect the law, nor the Congress, nor the executive branch,
nor the American citizens, whose hard-earned dollars have poured into
Goldman leading it to record profits, huge bonuses, and no results for
ordinary people.
Worse, it makes one wonder what Goldman Sachs has to hide. Otherwise,
why send irrelevant information to the commission and withhold other
information? Yet Goldman continues to drag its feet in responding, and
the commission had to subpoena.
Goldman Sachs could and should do better. They could lead Wall Street
in corporate citizenship. We now know that Goldman Sachs could easily
reduce the principal on every loan at Litton, write off all the late
fees, and give 320,000 citizens some relief from the housing crisis
that Goldman, along with the rest of Wall Street's biggest investment
banks--or I should say speculators--had in creating.
How much do you want to bet that they won't? Anyone want to hedge a
bet with a credit default swap or a synthetic collateralized debt
obligation? I bet Goldman would be willing to sell you one, but you
know, what they're really doing is they're trying to send their
lobbyists to try to meet with members of the commission that Mr.
Angelides heads.
The New York Times reports that, ``Lobbyists representing Goldman in
Washington tried to arrange one-on-one meetings with a handful of those
commissioners, including Mr. Angelides, but he declined to meet with
them.''
Congratulations, Mr. Angelides. Guess what, they do the same thing to
the Members of Congress. They wait for us in the hallways. They get on
the elevators with us if we refuse to meet with them. They pay their
lobbyists here lots of money.
So you keep doing what you're doing, Mr. Angelides. You keep digging.
I'm glad you declined to meet with them.
And you know, according to the people who spoke with the New York
Times, many of them said they spoke on the condition of anonymity
because they were not authorized to discuss the commission's inner
workings. So I'm glad to see that there are some Americans out there
who are trying to get to the truth, trying to get to the heart of the
matter, trying to get justice for the American people in the housing
market where the deck is so strongly stacked against ordinary citizens
who should hold one piece of paper they call their mortgage, and yet
the note for that is locked up somewhere upstream, held on Wall Street
or one of its subsidiaries. And most Americans who are getting thrown
out of their houses across this country and being forcibly removed
don't even have enough legal advice to know that they should be asking
the judge to produce the original note in those proceedings, not a
Xeroxed copy.
The American people: get yourself legal assistance back home from
your fair housing agencies, your counseling agencies. You have a right
to your own mortgage, and no one should take it away from you if you
have a leg to stand on. And the judge should be on your side if you ask
for that original note.
[From FT.com, June 16, 2010]
U.S Consumers Rage Against Goldman Unit
(By Suzanne Kapner and Francesco Guerrera)
As ever-darker clouds have gathered over Goldman Sachs in
recent months, its executives have relied on a consistent
line of defence.
As regulators, congressional investigators and activist
shareholders have accused Wall Street's most successful
investment bank of putting its interests ahead of those of
its clients, Goldman's response has been: we deal with
sophisticated investors who ought to know how to look after
themselves, not powerless individuals.
``We don't have banking branches . . . we provide very few
mortgages and don't issue credit cards or loans to
consumers,'' is how Lloyd Blankfein, Goldman's chief
executive, summarised the bank's modus operandi in a recent
appearance before a U.S. Senate subcommittee.
Yet, in one small corner of its domain, Goldman interacts
directly with ordinary Americans. Through its wholly owned
subsidiary Litton Loan Servicing, which is facing a wave of
complaints from consumers, Goldman collects payments on
320,000 loans, mainly in California and Florida, with an
unpaid principal balance of $50bn.
When Goldman acquired Litton in December 2007 for $430m,
the deal attracted little attention. Compared with Goldman's
$45bn in annual revenue, Litton is tiny. Goldman says Litton
services half of 1 per cent of U.S. mortgages.
The high-risk mortgages serviced by Litton were like the
many loans Goldman--and its rivals--packaged into complex
securities that plunged in value once the housing bubble
burst, leading to huge losses among investors.
Goldman's knowledge of the perilous state of the U.S.
property market, and its alleged reluctance to share it with
investors, is at the centre of civil fraud charges filed by
the Securities and Exchange Commission--which the bank
denies--and were the focus of an 11-hour grilling of Goldman
executives by Senate investigators in April.
Founded in 1988 by Larry Litton Sr in Houston after the
Texas real estate bust, Litton developed expertise in
collecting payments on high-risk mortgages that were near
default. The company was purchased in 1996 by Credit-Based
Asset Servicing and Securitization (C-Bass), which bought
troubled loans from banks and used Litton to restructure
them.
Because of its focus on distressed borrowers, Litton was
one of the first companies to experiment with reducing
interest payments for customers who had fallen behind to keep
them from losing their homes. Such ``loan modifications''
have become common practice.
Litton's focus on modifying loans, coupled with its
relationship with C-Bass, gave it an edge over rival
servicers.
Because C-Bass bought bonds that were backed by pools of
mortgages, Litton had the right to modify those loans once
they soured.
According to Moody's Investors Service, Litton has retained
the right to modify loans in 95 percent of the securities
backed by loans it services. In contrast, other servicers
have been blocked and even sued by investors, who claim loan
modifications violate the original contract terms.
``Litton has been more aggressive than some of the other
servicers,'' said Alan White, an assistant professor at the
Valparaiso University School of Law. ``It's part of their
culture.''
That approach has at times incurred the wrath of consumers.
Concerned about rising complaints against the company, the
Houston chapter of the Better Business Bureau conducted an
investigation in 2005. ``They were arrogant,'' said Dan
Parsons, president of the Houston chapter. ``It was all about
how much money they could make.''
The bureau voted to revoke the company's membership but
Litton resigned before it could act.
Larry Litton Jr, current chief executive of the servicer,
told the Financial Times the resignation was prompted by a
failure of the bureau to fully grasp its business strategy.
He added that Litton had long been an advocate of
restructuring consumer debt.
``We do it because it's a good financial decision for
investors, but also because it's a good outcome for
consumers,'' Mr Litton said.
When C-Bass ran into financial trouble in 2007, Goldman
snapped up Litton. Goldman said it has extensive procedures
in place to ensure that information from Litton is not used
inappropriately.
A person familiar with the situation said Mr Litton did not
report directly to Mr Blankfein or Goldman's senior
management, but interacted with lower-level mortgage
executives.
After buying Litton, Goldman took pains to operate the
company separately from its trading and advisory business and
does not use Goldman branding on Litton's marketing
materials. Such distance is in keeping with Goldman's desire
to be seen as a Wall Street firm that deals with high finance
only.
Many Litton customers did not realise the mortgage servicer
was owned by Goldman. Marla Vasquez, a disgruntled customer
in
[[Page H4575]]
California, said she learnt about the SEC investigation from
a radio broadcast. ``It surprised me Goldman owns a company
like this,'' she said.
____
[From FT.com, June 16, 2010]
Subprime Consumers Hit at Goldman
(By Suzanne Kapner)
Goldman Sachs is facing a wave of complaints from consumers
over the business practices of its mortgage servicing unit, a
subsidiary that collects payments on hundreds of thousands of
loans worth tens of billions of dollars.
Goldman bought Litton Loan Servicing--a Houston, Texas,
specialist in collecting money from high-risk borrowers--in
December 2007, a year after the bank decided to reduce its
exposure to the U.S. housing market.
The deal gave Goldman a new way to earn fees from subprime
borrowers and provided it with a street-level view of
conditions in the U.S. housing market as the financial crisis
deepened.
It also put the Wall Street bank in the unusual position of
facing hundreds of complaints from mainstream consumers, who
allege that Litton unfairly charged them money. Without
admitting wrongdoing, Litton agreed last year to pay $532,000
to settle a class-action lawsuit in Los Angeles, accusing it
of charging late fees during a 60-day grace period on loans
it acquired from other servicers.
``Litton saw a great opportunity to make a lot of money by
collecting servicing fees on troubled loans,'' said Dan
Parsons, president of the Houston chapter of the Better
Business Bureau, a non-profit group that promotes responsible
business practices. ``But when Litton takes over a loan, the
borrower tends to be worse off.''
Larry Litton Jr, chief executive of the Goldman unit,
declined to comment on specific complaints and said any fees
resulted from normal procedures. He added that it was
``inevitable'' Litton would face complaints as it deals
mainly with distressed borrowers. ``Do I wish complaint
levels were lower?'' he said. ``Absolutely, we take
complaints very seriously.''
The Better Business Bureau lists nearly 800 complaints in
the U.S. against Litton during the past three years, more
than have been filed against most similar-sized servicers. In
Houston, only three companies--Comcast, Telecheck and
Continental Airlines--received more complaints Mr Parsons
said.
Consumer Affairs, a website that tracks consumer problems,
said it had received 390 complaints against Litton in the
past year, a 60 percent rise over the prior 12 months, and
more than triple the number logged against some similar-sized
competitors. Many complaints against Litton come from
consumers who say they entered into ``trial'' mortgage
modification programmes that reduced their payments, only to
find out later that they had been denied a permanent
modification and owed more money than they would have if they
had not entered the programme.
Litton's loan modification application states borrowers are
liable for past due amounts, including unpaid interest, if
they are denied a permanent modification. Late fees are
supposed to be waived if permanent modifications are granted.
According to government data through April, Litton's rate for
converting loans from trial to permanent modifications was 29
percent, compared with rates of more than 80 percent for some
competitors.
____
[From the New York Times, June 7, 2010]
Financial Panel Issues a Subpoena to Goldman Sachs
(By Sewell Chan and Gretchen Morgenson)
Washington.--The commission investigating the causes of the
financial crisis said on Monday that it had subpoenaed
Goldman Sachs and harshly accused the investment bank of
trying to delay and disrupt its inquiry.
``Goldman Sachs has not, in our view, been cooperative with
our requests for information, or forthcoming with respect to
documents, information or interviews,'' Phil Angelides, the
chairman of the Financial Crisis Inquiry Commission, told
reporters on a conference call.
The deputy chairman, Bill Thomas, accused Goldman of
stonewalling, and said, ``They may have more to cover up than
either we thought or than they told us.''
But even as Goldman appeared to be uncooperative, it tried
over the last month to set up personal meetings with members
of the commission, two people briefed on the discussions
said.
Lobbyists representing Goldman in Washington tried to
arrange one-on-one meetings with a handful of commissioners,
including Mr. Angelides, but he declined to meet with them,
according to the people, who spoke on the condition of
anonymity because they were not authorized to discuss the
commission's inner workings.
Mr. Angelides and Mr. Thomas both said that Goldman had
inundated the panel with data--about five terabytes,
equivalent to several billion printed pages--and dragged its
feet on answering detailed questions about derivatives,
securitization and other business activities.
In particular, the commission sought records on
collateralized debt obligations based on mortgage-backed
securities, and the names of Goldman's customers in
transactions of derivatives. In a chronology it provided, the
commission also indicated that it was interested in Goldman's
dealings with the American International Group, the insurance
giant that collapsed in 2008, and in the bank's so-called
Abacus transactions, which are at the heart of a civil fraud
suit brought by the Securities and Exchange Commission.
The commission's unusual public criticism--it has issued 12
subpoenas, none accompanied by stinging accusations of
obstruction--underscored the anger in Washington at the
outsize profits and influence of Goldman, which had emerged
nearly unscathed from the financial crisis. It also reflected
the fallout from Goldman's unyielding strategy of standing
its ground in the face of inquiries and attacks.
A spokesman for Goldman, Michael DuVally, said, ``We have
been and continue to be committed to providing the F.C.I.C.
with the information they have requested.''
The lashing by the commission further complicated Goldman's
public image. In April, the bank was accused of securities
fraud in a civil suit filed by the S.E.C., which contended
that it created and sold a mortgage investment that was
secretly devised to fail.
That investment and others like it were the subject of a
Senate investigation that also exposed Goldman to withering
criticism. And federal prosecutors in Manhattan have begun
looking into the mortgage practices of banks, including
Goldman.
The commission, created by Congress, is required to deliver
a report by December, but with only $8 million and some 50
employees to draw on, it has at times seemed outmatched by
the targets of its inquiries.
``I suspect they're spending more on their lawyers than our
whole budget,'' Mr. Thomas conceded.
Lloyd C. Blankfein, Goldman's chairman and chief executive,
testified at the commission's first public hearing in
January, with the top bankers Jamie Dimon of JPMorgan Chase,
John J. Mack of Morgan Stanley and Brian T. Moynihan of Bank
of America.
After the hearing, the commission sent written questions
for Mr. Blankfein and made requests for records in April and
May.
Mr. Thomas, a California Republican who served 28 years in
the House, said the requests to Goldman were ``not
inordinate'' compared with similar queries sent to a half-
dozen other banks. All of the other institutions complied, he
said.
In contrast, Mr. Thomas said, Goldman gave a ``basically
incomplete'' response, even as it deluged the commission with
so much irrelevant information that it amounted to
``mischief-making'' that was both ``deliberate and
disruptive.''
Mr. Angelides, a former California treasurer and candidate
for governor, said, ``We did not ask them to pull up a dump
truck to our offices and dump a bunch of rubbish.'' He added,
``This has been a very deliberate effort over time to run out
the clock.''
The two men also seemed to acknowledge that the sheer
volume of data was beyond the commission's capacity to
analyze. ``We should not be forced to play Where's Waldo? on
behalf of the American people,'' Mr. Angelides said. ``This
is not right.''
Mr. Thomas, turning to the proverb about looking for a
needle in a haystack, said, ``We expect them to provide us
with the needle.''
The two men said that after the subpoena was issued on
Friday, Goldman had moved to schedule interviews with several
executives, including Mr. Blankfein; David A. Viniar, the
chief financial officer; Gary D. Cohn, the president and
chief operating officer; and Craig W. Broderick, the chief
risk officer.
The 10-member commission was slow to get started. It
recently replaced its executive director, B. Thomas Greene,
with Wendy M. Edelberg, an economist on loan from the Federal
Reserve, who had been the research director. Mr. Greene, a
former chief assistant attorney general for California,
remains on the commission's staff as senior counsel.
____________________