Posted on November 08 2018
If you are unfamiliar with the Role of Chairman/woman of the House Financial Services Committee...below is a brief primer...my suggestion is you vetted familiarize yourself with this House Committee before January 2019. Why? Because I can all but guarantee you that there will be some turbulence and I’m calling it now. My favorite word for 2019: SUBPOENA or SUBPOENAS
House Financial Services Committee
House Financial Services Committee (HFSC), oversees a large swath of issues specifically, (assumption that the House Rules for the next Congress will largely remain the same as for the agreed upon rules of the 114th Congress:
Pursuant to Clause 1(h) of rule X of the Rules of the House of Representatives for the 115th, Congress sets forth the jurisdiction of the Committee on Financial Services as follows:
1) Banks and banking, including deposit insurance and Federal monetary policy.
(2) Economic stabilization, defense production, renegotiation, and control of the price of commodities, rents, and services.
(3) Financial aid to commerce and industry (other than transportation).
(4) Insurance generally.
(5) International finance.
(6) International financial and monetary organizations.
(7) Money and credit, including currency and the issuance of notes and redemption thereof; gold and silver, including the coinage thereof; valuation and revaluation of the dollar.
(8) Public and private housing.
(9) Securities and exchanges.
(10) Urban development.
Subpoenas and Oaths:
I now refer you to pages 9 and 12 (marked concurrently pages 3 & 6) I’m the House Committee Rules found here
(e)(1) The power to authorize and issue subpoenas is delegated to the Chair. The Chair will provide written notice to the ranking minority member at least 48 hours in advance of the authorization and issuance of a subpoena, except when exigent circumstances exist that do not permit such amount of notice, in which case the Chair shall provide such notice as soon as possible.
(2) Authorized subpoenas shall be signed by the Chair or by any member designated by the Committee, and may be served by any person designated by the Chair or such member.
(3) The Chair, or any member of the Committee designated by the Chair, may administer oaths to witnesses before the Committee.
Deutsche Bank long fine record:
If I were to take an educated guess, I would say that there could be three to four areas that the -new- HFSC would rightfully so “investigate” further.
- SubPrime Mortgage, Libor manipulatioin, subsequent deviation of the Jan 2017 Consent Decree
- “Mirror Trading” which resulted in $10B in Russian Money Laundering via Moscow, London & NYC
- Loans extended to Donald Trump, various members of The Trump Family (Melania, Ivanka, Jared Kushner) and Trump Organization at-large
Justice Department & Deutsche Bank 2017
What MANY seem to overlooked was this January 17, 2017 Consent Order, keep in mind this was just a mere 3 days before Donald Trump was installed. Our Justice Department, Deutsche Bank and ACE Securities Corp entered into the following agreement for their role in the subPrime loans, destabilization of our economy and housing market that factored in to the “Great Recession of 2008”. Specifically after years of investigation by the FTC, the Federal Reserve (the Fed), the New York Department of Financial Services (NY DFS) found that Deutsche Bank and it’s successors engaged in a protracted game of financial subterfuge and nearly brought the worldwide financial markets to its knees,
Misleading Investors in its Sale of Residential Mortgage-Backed Securities.
loans securitized in its RMBS were originated generally in accordance with mortgage loan originators’ underwriting guidelines. But as Deutsche Bank now acknowledges, the bank’s own reviews confirmed that “aggressive” revisions to the loan originators’ underwriting guidelines allowed for loans to be underwritten to anyone with “half a pulse.” More generally, Deutsche Bank knew, based on the results of due diligence, that for some securitized loan pools, more than 50 percent of the loans subjected to due diligence did not meet loan originators’ guidelines.
My personal favorite section of the January 17, 2017 Agreement can be found on pages 3-5, specifically paragraphs 4, 5 and 6 respectively.
Until the date upon which all investigations and any prosecution arising out of the Covered Conduct are concluded by the Department of Justice, whether or not they are concluded within the term of this Agreement, Deutsche Bank shall, subject to applicable laws or regulations:
(i) cooperate fully with the Department of Justice (including the Federal Bureau of Investigation) and any other law enforcement agency designated by the Department...Justice regarding matters arising out of the Covered Conduct in the investigation, prosecution of, or litigation against any current or former officer or employee of Deutsche Bank or any other third-party entity or individual
ii) assist the Department of Justice in any investigation or prosecution arising out of the Covered Conduct by providing logistical and technical support for any meeting, interview, grand jury proceeding, or any trial or other court proceeding;
(iii) use its best efforts to secure the attendance and truthful statements or testimony of any officer, director, agent, or employee of any of the entities released in Paragraph 5 at any meeting or interview or before the grand jury or at any trial or other court
proceeding regarding matters arising out of the Covered Conduct; and
(iv) provide the Department of Justice, upon request, all non-privileged information, documents, records, or other tangible evidence regarding matters arising out of the Covered Conduct about which the Department or any designated law enforcement agency inquires.
Deutsche Bank’s Conduct Contributed to the 2008 Financial Crisis
Based on that investigation, the United States believes that there is an evidentiary basis to compromise potential legal claims by the United States against Deutsche Bank for violations of federal laws in connection with the marketing, structuring, arrangement, underwriting, issuance, and sale of RMBS.
Deutsche Bank shall pay a total amount of $3.1 billion dollars to resolve
pending and potential claims in connection with the covered conduct...
...provide an additional $4.1 billion in relief to homeowners, borrowers, and communities harmed by its practices...Deutsche Bank concealed from investors that significant numbers of borrowers had second liens on their properties. In one instance, a supervisory Deutsche Bank trader specifically instructed his team that if investors asked about second liens, “‘[t]ell them verbally . . . [b]ut don’t put in the prospectus.’” Deutsche Bank knew that these second liens increased the likelihood that a borrower would default on his or her loan.
Deutsche Bank SubPrime Statement of Facts
As detailed on page 3 paragraph 1 of Annex 1, Deutsche Bank pumped and dumped nearly $100BILLION of their subprime garbage into the housing market which attributed to the near financial collapse.
Statement of Facts, Appendix A-D:
Deutsche Bank represented to investors that disclosed borrower FICO scores were accurate as of the “cut-off date” of the RMBS issuance. However, Deutsche Bank knowingly represented borrowers’ FICO scores as of the time of the origination of their loans despite the bank’s knowledge that these scores had often declined materially by the cut-off date.
Annex 2 Consumer Relief
Deutsche Bank will also provide $4.1 billion in the form of relief to aid consumers harmed by its unlawful conduct. Specifically, Deutsche Bank will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country. It will also provide financing for affordable rental and for-sale housing throughout the country. Deutsche Bank’s provision of consumer relief will be overseen by an independent monitor who will have authority to approve the selection of any third party used by Deutsche Bank to provide consumer relief.
Deutsche Paul Mangione, September 2017 Civil Fine:
On September 11, 2017 the Justice Department announced it had filed a civil complaint against Paul Mangione, former Deutsche Bank head of subprime trading. You can read the 67 page Complaint here.
Mangione engaged in a fraudulent scheme to sell ACE 2007-HE4 (HE4) -- a $ 1 billion security -- and ACE 2007-HE5 (HE5) -- a $400 million security -- by misleading investors about the quality of the loans backing the securitizations. The complaint further alleges that Mangione also misled investors about the origination practices of Deutsche Bank’s wholly-owned subsidiary, DB Home Lending LLC (DB Home) (f/k/a Chapel Funding LLC), which was the primary originator of loans included in the deals. Mangione approved offering documents for HE4 and HE5 even though he knew they misrepresented key characteristics of the loans, including compliance with lending guidelines, borrowers’ ability to pay, borrowers’ fraud and appraisal accuracy.
The HE4 and HE5 offering documents also falsely represented that DB Home had “developed internal underwriting guidelines that it believe[d] generated quality loans” and that DB Home had instituted a quality control process that “monitor[ed] loan production with the overall goal of improving the quality of loan production,” among numerous other representations designed to instill in investors trust in DB Home’s underwriting processes. As alleged in the complaint, Mangione knew that these statements were false.
NY-DFS $10B Russia Money Laundering 2017
In late January of 2017, NY-DFS found Mirror Trading, lack of controls related to “know your customer”. After a exhaustive investigation NY DFS identified that Deutsche Bank, along with numerous senior managers consistently missed opportunities to identify, prevent and failed to properly investigate a protracted mirror-trading scheme. This mirror scheme originated in Deutsche’s Moscow branch and involving New York and London branches. NY DFS Investigatiors determined:
Operating through the equities desk at Deutsche Bank’s Moscow branch, certain companies that were clients of the Moscow equities desk issued orders to purchase Russian blue chip stocks, always paying in rubles. Shortly thereafter, sometimes on the same day, a related counterparty would sell the identical Russian blue chip stock in the same quantity and at the same price through Deutsche Bank’s London branch.
The counterparties involved were always closely related, often linked by common beneficial owners, management or agents. The trades were routinely cleared through the bank’s Deutsche Bank Trust Company of the Americas (DBTCA) unit. The selling counterparty was typically registered in an offshore territory and would be paid for its shares in U.S. dollars. At least 12 entities were involved, and none of the trades demonstrated any legitimate economic rationale.
Department's investigation that spanned Deutsche Bank's global enterprise. These flaws allowed a corrupt group of bank traders and offshore entities to improperly and covertly transfer more than $10 billion out of Russia, by conscripting Deutsche Bank operations in Moscow, London and New York to their improper purpose
The suspicious security trading schemes identified - termed "mirror trades"-permitted this corrupt consortium to move very large sums of money out of Russia under the radar and without the scrutiny ofDeutsche Bank's compliance function. By converting rubles into dollars through security trades that had no discernible economic purpose, the scheme was a means for bad actors within a financial institution to achieve improper ends while evading compliance with applicable laws.
Afflicted with inadequate AML control policies, procedures, and structures, Deutsche Bank missed several key opportunities to identify and interdict this scheme.
Moreover, the suspicious mirror-trading machinations occurred at a time Deutsche Bank was on clear notice of numerous deficiencies in its BSA/ AML systems and manage
November 4, 2015 The Fed & NY-DFS levy $258M fine
On November 4 2015, Deutsche Bank was fined $258 million for processing payments valued at more than $10 billion on behalf of Iranian, Libyan, Syrian, Burmese, and Sudanese entities to evade U.S. sanctions, see NYDFS Order here.
Deutsche Bank AG (Deutsche Bank or the Bank) agreed to pay a total of $258 million in penalties as part of consent orders entered into with the New York State Department of Financial Services (the NYDFS) and the Board of Governors of the Federal Reserve System (the Federal Reserve).
Bank employees recognized that U.S. sanctions rules,which applied at that time or over the course of subsequent years to Iranian, Syrian, Libyan, Burmese, or Sudanese customers or to customers who were listed on OFAC’s SDN list... Payments involving sanctioned entities were subject to additional scrutiny and might be delayed, rejected, or frozen in the United States. In order to facilitate what it saw as “lucrative” U.S. dollar business for sanctioned customers, Bank employees developed and employed several processes to handle dollar payments in non- transparent ways that circumvented the controls designed to detect potentially-problematic payments.
non-transparent methods and practices to conduct more than 27,200 U.S. dollar clearing transactions1 valued at over $10.86 billion on behalf of Iranian, Libyan, Syrian, Burmese, and Sudanese financial
Link to The Federal Reserve Docket No. 15-034-B-FB 15-034-CMP-F, Order to Cease and Desist and Order of Assessment of a Civil Money Penalty Issued Upon Consent Pursuant to the Federal Deposit Insurance Act, as Amended...can be found here.
HFSC Letters 2017 to present:
For those of you who have followed me on Twitter and/or this blog, you know that I tend to track Congressional letters like a hawk. Those who are not in DC might casually say, “oh so what it’s a letter” but here’s the inside scoop of why Congressional letters are far more than just a standard letter. When a member of Congress sends an official Congressional inquiry in the form of a letter, understand that this is a placeholder. It isn’t me making hay out of thin air. I know DC. I know that letters serve multiple purposes, specifically it memorializes “issues”, it creates paper-trial but it also creates a breadcrumbs trail, so when you party comes in to power, you reach in to your file of letters and go full steam ahead.
Based on a bit of research, I believe this March 2017 letter from (then) Ranking Member Rep Waters to (then) HFSC Chairman Jeb Hensarling should be carefully reviewed. Why? It was Rep Waters’ first written communication regarding Donald Trump and the yet to be explained Deutsche Bank Relationship. Specifically the following paragraphs should be closely scrutinized:
For example, in January of this year, before Trump was sworn into office, Deutsche Bank paid the Department a record breaking $7.2 billion fine for deliberately misleading investors in its sale of toxic mortgage backed securities. In December 2016, Deutsche Bank agreed to pay $37 million in penalties for misleading clients about how their stock orders were sent for certain trades. In November 2015, Deutsche Bank paid a $258 million penalty for processing payments valued at more than $10 billion on behalf of Iranian, Libyan, Syrian, Burmese and Sudanese entities to evade U.S. sanctions. In April 2015, Deutsche Bank pled guilty to criminal charges and paid a $2.5 billion penalty for manipulating the London Interbank Offered Rate, or LIBOR, a key benchmark interest rate. These repeated, record-breaking penalties appear to evidence a blatant disregard for U.S. law, requiring a more aggressive approach to hold Deutsche Bank accountable.
President Trump’s conflict of interest with Deutsche Bank, however, may undermine the independence and impartiality of the Department’s ongoing investigation and diminish the likelihood that Deutsche Bank and its senior leadership will be brought to justice. Of particular concern, is the fact that Deutsche Bank is one of Trump’s top creditors with an estimated $360 million in outstanding loans to his companies. Furthermore, President Trump has already shown his willingness to exert considerable pressure on the Department to achieve his own ends by firing then Acting Attorney General Sally Yates for failing to defend his controversial Executive Order.
May 2017 letter to Treasury Sec:
On May 23, 2017 Rep Waters sent the following letter to US Treasury Secretary Steve Mnuchin
President Trump’s financial entanglements with Russia. Indeed, the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, employs a team of highly qualified career personnel with expertise in financial intelligence who work closely with law enforcement to analyze the 200 million Bank Secrecy Act records maintained by FinCEN and derived from the more than 80,000 financial institutions subject to FinCEN’s reporting requirements.
The names and identities of all parties suspected of engaging in money laundering through Trump’s Taj Mahal Casino Resort, which was the subject of a $10 million fine for significant and long standing anti-money laundering violations
For now, I’m going to pause this entry and push my volume 2 until tomorrow...until then I give to you my favorite exchange with Rep Waters and Sec Mnuchin...during the June 2017 hearing...this is the moment I literally fell in love with Auntie Maxine:
While you're here, throw us a bone.
Mad Dog is thrilled to have Spicy in our PAC(k). We are proud to provide a space for her tireless, hard hitting, in-depth investigations. But we can’t do it without you.
Our numbers are growing. Our voices are being heard. Our campaigns are making a difference. Help us, and Spicy, continue to fight the good fight. Consider a donation to help support the work of Mad Dog PAC today.