JPMorgan Chase & Co. (JPM), sued for $6.4 billion by the trustee for Bernard L. Madoff’s firm, said the trustee has no right to “abrogate” a yearlong agreement to protect trade secrets by revising his rules for handling confidential information.

The trustee, Irving H. Picard, seeking $100 billion for investors in Madoff’s Ponzi scheme in lawsuits, has asked a judge for more freedom to use information demanded for his investigations. JPMorgan’s objection is one of at least eight filed yesterday by banks and investment managers including UBS AG (UBSN), Citigroup Inc. (C) and HSBC Holdings Plc. (HSBA)

JPMorgan, based in New York, said it gave Picard documents 22 times in the past 15 months, relying on his agreement not to share the information with competitors or other parties.

“The proposed order would permit the trustee to disclose JPMorgan’s confidential and proprietary information to any party or its agent in any one of the more than one thousand adversary proceedings that have been commenced by the trustee,” the second-biggest U.S. bank said in a filing in U.S. Bankruptcy Court in New York. “The trustee is not entitled to abrogate confidentiality arrangements that have been relied upon by JPMorgan and other parties.”

If Picard has his way, the bank’s anti-money-laundering policies, risk-assessment methods and internal reviews might be shared with every major financial institution in New York and thousands of other parties, it said.

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The Madoff Ponzi scheme was sitting on a cash hoard in excess of a billion dollars by the 1990s. Yet, much of that money did not stay in the Ponzi account, account 703 at JPMorgan Chase, or make it into the hands of other Madoff investors. For many years, in excess of a billion dollars was missing from the 703 account as money drained out of the eleven other accounts, which received transfers from the Ponzi account. The author uses previously unanalyzed data from the Security Investor Protection Corporation (SIPC) to estimate that the balances in the JPMorgan Chase account were so large that JPMorgan Chase earned in $907 million pre-tax from the Madoff deposits at the bank from 1986 to 2008.

Steve Fishman, New York Magazine

Bernard L. Madoff is in therapy. Each week, he waits for the signal that prisoners are allowed to leave their housing units, then he walks the five minutes from his “room,” as he calls it, to the psychiatric unit at the Federal Correctional Institution in Butner, North Carolina, where he can unburden himself. The sessions are often teary.

“How could I have done this?” he asks. “I was making a lot of money. I didn’t need the money. [Am I] a flawed character?”

In some ways, Madoff has not tried to evade blame. He has made a full confession, telling me again and again that nothing justifies what he did. And yet, for Madoff, that doesn’t settle the matter. He feels misunderstood. He can’t bear the thought that people think he’s evil. “I’m not the kind of person I’m being portrayed as,” he told me.

And so, sitting alone with his therapist, in the prison khakis he irons himself, he seeks reassurance. “Everybody on the outside kept claiming I was a sociopath,” Madoff told her one day. “I asked her, ‘Am I a sociopath?’ ” He waited expectantly, his eyelids squeezing open and shut, that famous tic. “She said, ‘You’re absolutely not a sociopath. You have morals. You have remorse.’ ” Madoff paused as he related this. His voice settled. He said to me, “I am a good person.”

There aren’t many who would agree. For most of the world, Bernie Madoff is a monster; he betrayed thousands of investors, bankrupted charities and hedge funds. On paper, his Ponzi scheme lost nearly $65 billion; the effects spread across five continents. And he brought down his own family with him, a more intimate kind of betrayal.

Madoff, 72, is in prison with a sentence of 150 years, which seems more than just, given the enormity of his crime. Though the financial damage continues, prison seemed to conclude Madoff’s part of the story. Then, on the second anniversary of Madoff’s arrest, his son Mark, age 46, slipped a vacuum-cleaner cord over a pipe on the living-room ceiling of his Soho loft and tried to hang himself. When it broke, he tried again with a dog’s leash, and succeeded. This was the kind of cosmic retribution that might have been exacted in the House of Atreus, the suicide an accusation of a vast betrayal. It seemed a death designed to hurt the living—even a monster’s conscience must be moved by such a demonstration. After all, before he was exposed as a fraud, Madoff had been a family man.

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Danny Schechter, Al-Jazeera

Hats off to Matt Taibbi for staying on the Wall Street crime beat, asking in his most recent report in Rolling Stone: “Why Isn’t Wall Street in Jail?”

“Financial crooks,” he argues, “brought down the world’s economy — but the feds are doing more to protect them than to prosecute them.”

True enough, but that’s only part of the story. The Daily Kos called his investigation a “depressing read” perhaps because it suggests that the Obama Administration is not doing what it should to reign in financial crime. Many of the lawyers he calls on to act come from big corporate law firms and buy into their worldview.

Kos should be more depressed by the failure of the progressive community to focus on these issues, and not pressing the government to do the right thing.

There is much more to this story. It’s also more about institutions than individuals, more about a captured system that enables and covers up crime and, then, deflects attention away from the deeper problem.

Ten problems

You could see that when television host Bill Mahrer pressed Taibbi to name the biggest Wall Street crooks, on his weekly political comedy show, he didn’t fully understand what we are really up against.

Here are ten of well-planned but flawed factors that help explain the procrastination and rationalisation for inaction. The government is not just to blame either. Several industries working together, through their firms associations, and well-paid operatives, collaborated over years to financialise the economy to their own benefit.

Personalising bad guys makes for good TV without offering a real explanation.

When financial institutions and services became the dominant economic sector, they, effectively, took over the political system to fortify their power. It was a done incrementally, over years, with savvy, foresight and malice.

First, many of those who might be charged with financial crimes and fraud invested in lobbying and political donations to insure that tough regulations and enforcement were neutered before the housing bubble they promoted took off.

After hundreds of bankers were jailed in the wake of the Savings and Loan crisis, financial fraudsters pushed for weakened regulations, guaranteeing that their colleagues wouldn’t be jailed in when the next crisis hit.

In effect, their deregulation strategy also deliberately ”decriminalised” the environment to make sure that practices that led to high profits and low accountability would be permissible and permitted. What was once illegal soon became “legal”.

No enforcement

The cops and watchdogs were taken off the beat. Anticipating and then dissolving restraints, they engineered a low-risk crime scene in the way the Pentagon systematically prepares its battlefields. This permitted illicit practices, to be encouraged by CEOs in a variety of control frauds to keep profits up so that the executives could extract more revenue.

Today’s proposed Republican cutbacks of the funding of regulatory bodies aims to undercut recently passed financial reforms. One Commissioner of the Commodity Futures Trading Commission said if the budget is slashed, “there would essentially be no cop on the beat…we could once again risk another calamitous disintegration.” He added, according to a New York Times report, “the process will mean nothing, squat, diddley … if we get cut we’re going to be in a world of hurt.”

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Since starting MFI-Miami almost three years ago, my staff and I have reviewed nearly 800 mortgage files and in nearly 70% of those file where the homeowner had their taxes and insurance escrowed, the were some serious issues.

“Never ask when you can take” –Ferengi Rule of Acquisition #52

One of my clients in northern Michigan had been escrowing her payments to Countrywide Home Loans and later Bank of America for nearly 3 years.  Last year, because of some family issues Bank of America began foreclosure proceedings against her.  While her attorney and I began preparing her lawsuit against BAC Home Loan Servicing and their attorney, Trott & Trott for illegally foreclosing, Grand Traverse County initiated a tax foreclosure for unpaid property taxes from 2007.  Taxes that were supposed have been paid by Countrywide Home Loans.

Another client in Massachusetts had BAC Home Loan Servicing force place flood insurance as part of her escrow payment.  This would have been fine had she actually lived in a FEMA designated flood plane but she didn’t.  As part of the investigation, I contacted the insurance company Bank of America had listed on her statement that they were paying $400 a month to and discovered this insurance company did not have any record of my client in their system and they don’t offer flood insurance. They only offer homeowners insurance to active and retired military personnel.

An attorney friend of mine in Fort Lauderdale, had Chase Home Finance force place an insurance policy on his home and forced him to escrow the policy because his homeowners policy lapsed for three weeks two years prior while he had been in Europe on business. Even though there was a current paid policy in place and there were no claims filed in the three week period the policy had lapsed.

Several months ago, OCWEN force placed tax and insurance escrow on a client of mine in Illinois who was one day late paying his summer tax bill.

Last week, Fox-4 News in Dallas reported the story of Bertha Andrews in Dallas, who was forced out of her house by OCWEN. OCWEN paid her tax bill of $3500 and tacked $400 a month on to her mortgage payment even though Ms. Andrews had a tax deferment from Dallas County until she sold her home because she was taking care of her ailing mother.

Last week, Philadelphia homeowner, Patrick Rodgers successfully sued Wells Fargo for not answering his Qualified Written Request when they increased his homeowner’s policy from an $180,000 policy to a $1,000,000 policy.  Wells Fargo claimed it was for the rebuilding costs if something happened to the turn of the century home.  Although the value on the home was under $200,000 and the homeowner only owed $130,000.

“Never be afraid to mislabel a product.” –Ferengi Rule of Acquisition #239

This is nothing compared to what they like to do for homeowners going into modifications.  HAMP guidelines dictate that all HAMP approved modification must include escrowed taxes and insurance payments during both the trial period and after the permanent modification is approved.

When the homeowner receives the letter proposing modification terms, it usual contains a lower interest rate a lower principal and interest payment.  This all sound great until you read the amount for the escrowed taxes and insurance.  In most cases, the escrow payments are usually 200% to 250% more than what the homeowner was paying prior to the modification.

BAC Home Loan Servicing is infamous for doing this.  Like my client, Lynne Lucas who I’ve written about several times. Last year, when she opened her modification approval letter from BAC Home Loan Servicing, she discovered they were lowering their interest rate from 6.5% to 4.75% which sounded great until she read demanding a monthly escrow payment of $580.17 a month from her despite her homeowners insurance being current and their taxes were current.  This is a 250% increase from the $231.17 underwriters at Countrywide Home Loans used for the cost of taxes and insurance when they approved the loan in 2005.  All of this increased her payment by $570 per month to $1,723.65.  This meant she was paying BAC $6962.04 per year in taxes and insurance when her taxes and insurance are actually $2900 per year.

In the majority of cases I investigate, mortgage servicers are not paying the taxes in a timely manner and that’s if they’re even paying them.  In most cases, the mortgage servicer usually waits until days before the property goes into tax foreclosure before paying the tax bill and in most states this means the tax bill is 24 months delinquent.  Like I said, that’s if they actually pay them.

In Lynne Lucas’s case and most other modification cases, when you add up the proposed escrow payments over a two year period it adds up to the exact number the homeowner was behind on their mortgage.   In the off chance the mortgage servicer does pay the taxes, they bill it to the trustee for the asset backed security or just eat it because they bought the loan from the trustee for pennies on the dollar and will recover when they sell the property after the foreclosure.   So they’re really not out any money.  In non-modification cases they do it simply to line their pockets.

“Not even dishonesty can tarnish the shine of profit.” –Ferengi Rule of Acquisition #181

The mortgage servicers pull this bullshit simply because they know the system in Washington DC will let them get away with it.  Like two bit hood, they know it’s to easier to steal from grandma and the disabled then it is a member of the Plutocracy.

After all, the reason Bernie Madoff went to jail was not because he ripped people off but because he ripped off members of the Plutocracy. The ponzi scheme Madoff ran looks like kindergarten production of the movie, Wall Street compared to the $70 Trillion ponzi scheme that Morgan Stanley, Lehman Brothers, Bear Stearns, Bank of America, Citigroup, Wells Fargo, JPMorgan Chase, Deutsche Bank and Goldman Sachs all have their hand in it.

Last week, Matt Taibbi wrote a great piece in Rolling Stone about how the banks know they can get away with ripping off grandma because of the revolving door at the SEC.  The banks also have the Speaker of the House, John Boehner as their financial bukkake boy.

You also have the Acting Comptroller of the Currency John Walsh whitewashing over these abuses by the banks which service most of the mortgage loans in this country.

Two years ago, I wrote a piece about how the FBI’s white collar crime division knew of as early as 2003 that the financial crisis was looming.  The Bush Administration’s solution to this was to gut the FBI’s white collar crime division by nearly 65%.

Banks know grandma or the over extended middle class in this country won’t fight back and the ones who do don’t have the testicular fortitude to fight them indefinitely.

E. Scott Reckard, Los Angeles Times

More than three years after Bank of America Corp. agreed to acquire Countrywide Financial Corp., the legal mess the bank inherited from the mortgage giant seems only to grow.

It was no secret that the bank took on a heaping plate of litigation with the Calabasas-based lender, which during the housing boom had matched every risky loan its rivals devised.

But adversaries who appeared to have settled Countrywide-related claims are returning to besiege BofA again, while new demands are surfacing in courts across the country.

“We knew BofA was going to be taking on a lot of legal problems with Countrywide, which was a big concern of ours at the time of the acquisition,” said RBC Capital Markets analyst Joe Morford. “But even so, it’s been worse than we expected.”

This week alone brought fresh lawsuits in New York and Los Angeles, one filed by investors in Countrywide’s mortgage-backed bonds and the other by hedge funds that bought private Countrywide securities. Both sets of plaintiffs allege they were misled about the risks the lender had taken. BofA declined to comment on the suits.

Bank of America thought it had rid itself of a major pain last August by settling, for $600 million, class-action litigation brought by former Countrywide shareholders who lost billions when the mortgage company’s stock price plunged.

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Citigroup Inc tried to pass on its exposure to Bernard Madoff to other banks just months before his epic fraud was revealed, the Madoff trustee said in a lawsuit accusing a second major U.S. bank of unsavory dealings with the financier.

Trustee Irving Picard said red flags about Bernard L. Madoff Investment Securities LLC were apparent to Citi as early as 2005, according to court papers unsealed on Monday. The lawsuit seeks $425 million from the bank.

Madoff was arrested in December 2008 after admitting he ran a decades-long, multibillion-dollar swindle, considered the biggest investment fraud in history.

Picard also has sued JPMorgan Chase & Co, Madoff’s primary banker, for $6.4 billion, alleging the bank turned a blind eye as Madoff ran a Ponzi scheme.

Portions of both lawsuits were edited to conceal the names of bank personnel and others. The lawsuit against Citi was filed on December 8 in U.S. Bankruptcy Court in New York.

It cited one email by a Citigroup Global Markets Ltd trader in September 2008 reaching out to another bank, which was unidentified.

“We’re needing to terminate our Madoff trade. Do you have appetite for that risk over there?” the email said.

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Federal prosecutors in Los Angeles have dropped their criminal investigation into Angelo R. Mozilo, the former chief executive of Countrywide Financial, once the nation’s largest mortgage lender, according to a person with direct knowledge of the investigation.

The closure of the case after two years of inquiry follows last October’s settlement by Mr. Mozilo of insider trading allegations made by theSecurities and Exchange Commission. Regulators had contended that Mr. Mozilo sold $140 million in Countrywide stock between 2006 and 2007 even as he recognized that his company was faltering. Countrywide and Bank of America paid $45 million of Mr. Mozilo’s $67.5 million settlement, and he was responsible for the rest.

Without admitting or denying wrongdoing, Mr. Mozilo agreed to be banned from serving as an officer or a director of a public company.

The conclusion by prosecutors that Mr. Mozilo, 72, did not engage in criminal conduct while directing Countrywide will likely fuel broad concerns that few high-level executives of financial companies are being held accountable for the actions that led to the financial crisis of 2008.

Hundreds of billions of dollars have been lost by investors while millions of borrowers have lost their homes. Few of the people who ran the institutions that contributed to the disaster have been found liable.

E-mails and other documents supplied to regulators in the S.E.C.’s case against Mr. Mozilo showed him discussing the company’s lending practices and describing some of its loans as “toxic” and “poison.” Nevertheless, the company kept selling the types of loans Mr. Mozilo was denigrating.

The person with knowledge of the probe insisted on anonymity because he was not authorized to speak publicly. The closing of the criminal case was first reported by The Los Angeles Times.

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Jailed Texas financier R. Allen Stanford has filed a lawsuit accusing prosecutors and federal agents of depriving him of his constitutional rights by using abusive law-enforcement tactics.

He is asking for $7.2 billion in damages.

The lawsuit filed Wednesday comes after Stanford was declared incompetent to stand trial on charges he bilked investors out of $7 billion in a massive Ponzi scheme.

Stanford is accusing U.S. Department of Justice prosecutors as well as two FBI agents, five U.S. Securities and Exchange Commission agents, and 15 other unnamed agents and law enforcement officials. He says they used illegal tactics to prosecute him, seize all his personal and business properties, and prevent him from defending himself in both the criminal and civil cases he is facing.

The jailed financier is accusing federal agents of using more than $51 million of his own seized money to pay for their investigation.

Stanford and three former executives of his now-defunct Houston-based Stanford Financial Group are accused of orchestrating a colossal pyramid scheme. They allegedly advised clients from 113 countries to invest more than $7 billion in certificates of deposit at the Stanford International Bank on the Caribbean island of Antigua, promising huge returns.

Stanford is also fighting an SEC lawsuit filed in Dallas that makes similar allegations. A receiver appointed in the SEC suit seized most of Stanford’s assets.

“By subjecting Mr. Stanford to multiple prosecutions for the same offense, defendants have deprived him of his liberty and property,” Wednesday’s lawsuit says.

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