According to the State House News Service, Deval Patrick and Robert Rubin, former Citigroup Chairman, will share the same stage. This may be the first time, since the infamous 2007 phone call between the two, this has happened publicly. At noon tomorrow, June 19, 2012, Patrick will speak about the state of the economy on a panel with Rubin at BIO, the biotechnology conference at the Boston Convention Center. This gives Elizabeth Warren a perfect opportunity to demand answers, as she’s called for in the past from Rubin, and Patrick. Elizabeth Warren last week told Massachusetts what she would ask Jamie Dimon, at JP Morgan Chase, will she also tell us what she’d ask Rubin and Patrick, who share the same stage tomorrow.
Let’s back up a bit…
In December of 2011, CBS aired a 60 minutes episode entitled “Prosecuting Wall Street”. The episode was an examination of Countrywide Mortgage and Citigroup Financial and their mortgage businesses, leading up to the mortgage crash. After the program aired, Elizabeth Warren, by then a candidate for Senate, tweeted about the show (HT: http://www.progressiveblue.com/diary/6271/a-righteous-anger-demanding-wall-street-accountability”>Progressive Blue).
Warren was asking for accountability from those at the head of Citigroup. The time period covered by the 60 Minutes special included the time that Deval Patrick, infamously made a phone call to former Treasury Secretary, and then Citigroup Chairman Robert “Bob” Rubin. The video of the segment is below.
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Of particular note in the video is the segment where former Citigroup employee, and whistleblower, Robert Bowen. Bowen discusses how he warned upper management, including Rubin, repeatedly that the assets they were purchasing were toxic.
Until 2008, Richard Bowen was a senior vice president and chief underwriter in the consumer lending division of Citigroup. He was responsible for evaluating the quality of thousands of mortgages that Citigroup was buying from Countrywide and other mortgage lenders, many of which were bundled into mortgage-backed securities and sold to investors around the world. Bowen’s job was to make sure that these mortgages met Citigroup’s own standards – no missing paperwork, no signs of fraud, no unqualified borrowers. But in 2006, he discovered that 60 percent of the mortgages he evaluated were defective.
In early November of 2007, with Citi’s mortgage losses mounting, Bowen decided to notify top corporate officers directly. He emailed an urgent letter to the bank’s chief financial officer, chief risk officer, and chief auditor as well as Robert Rubin, the chairman of Citigroup’s executive committee and a former U.S. treasury secretary. The letter informed them of “breakdowns of internal controls” in his division and possibly “unrecognized financial losses existing within our organization.”
This is the exact time-frame in which Deval Patrick made a phone call which helped put Citigroup in this position. In October of 2010, Red Mass Group took a detailed look at what the purchase of ACC Capital, on Deval Patrick’s recommendation, meant to Citigroup.
In the late summer early fall of 2007 the housing bubble burst. The purchase of ACC significantly increased Citi’s exposure to the toxic sub-prime marketplace. Around this time Citi insiders told the NY Times that the purchase, finalized with the help of the Deval Patrick phone call, was akin to “catching a falling knife”.
As the financial markets reeled from the housing bust fueled by sub-prime defaults, Citigroup lined up for a Federal Bailout. Under the TARP regime citibank received over $250B in TARP money. To put that in perspective the Marshall Plan, which rebuilt all of Europe, indexed for inflation still rises to just half that amount.
As their losses continued as a result of their overexposure to sub-prime mortgages Citigroup laid off 70,000 employees and saw it’s stock plummet from highs of the mid fifty dollar range to hovering around $4.00 for the better part of two years. The market capitalization of the company fell by 98.4% from $244B to $6B. It’s collapse threatened to take the economy down with it.
The facts are pretty clear Citigroup’s sub-prime exposure were a major cause to its brink of failure. An exposure that was dramatically increased by the purchase of ACC Capital Holdings assets. The purchase of which was finalized shortly after Deval Patrick, with the full weight, faith and credit of the Commonwealth behind him, vouched for the management and business practices of ACC Capital.
In December of 2011, as she had done in the past, Elizabeth Warren called for accountability from those who created our financial problems. In this case, she was directly referring to Citigroup financial, whose practices included buying sub-prime lender ACC Captial Holdings. The purchase of which led it and the nation close to ruin.
Couple her disgust at Citigroup with her documented attacks on Ameriquest which have been documented before at Red Mass Group, and one is left to wonder what Elizabeth Warren would ask of the two people, who know exactly what happened when Deval Patrick vouched for Roland Arnall and ACC Capital holdings.
Now that Deval Patrick is supporting Elizabeth Warren, has her anger at what happened under his watch subsided? Or will she take the opportunity tomorrow to personally begin “demanding accountability” from two Democrats who got us in the financial mess we are in? Or, have the needs of her political campaign become an obstacle to the truth?