[Congressional Record (Bound Edition), Volume 156 (2010), Part 8]
[House]
[Pages 10948-10950]
[From the U.S. 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 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.

[[Page 10949]]

  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.

[[Page 10950]]

     Marla Vasquez, a disgruntled customer in 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.

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