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BARNEY FRANK CENSURES LAWSUITS TARGETING FIRMS' 'GOOD SAMARITAN' BUYS Rep. Barney Frank (D-Massachusetts) is known for making waves in Washington, and he's remained true to form even in the sunset of his final term in the U.S. House of Representatives. Frank made a public statement in late October in defense of JPMorgan Chase, calling the U.S. government's lawsuit against the financial institution a case of "no good deed goes unpunished." New York Attorney General Eric Schneiderman filed a suit against JPMorgan on October 1 for the alleged misconduct of Bear Stearns & Co. prior to JPMorgan's acquisition of the failing investment bank. The case was filed with the court on behalf of President Obama's federal-state task force investigating Wall Street firms' roles in the financial crisis. Frank said he has first-hand knowledge of the Federal Reserve and Treasury Department coercing JPMorgan into taking over Bear Stearns' operations leading up to that fateful day in March 2008 when JPMorgan stepped up with cash-in-hand and shielded the markets from an economic shock that would have purportedly broken the U.S. financial system. "The federal officials involved believed that the failure of Bear Stearns would have terribly negative consequences for the economy, and they urged JPMorgan Chase to do a good deed by taking over an institution which, I believe, the bank would never have sought to acquire absent that urging," Frank said in a publicly released statement. Frank contends that officials should be going after the individuals responsible for the misrepresentations, fraud, and deceptive practices that drained millions of dollars from investors' coffers and sent the nation's housing market into its tailspin; not the institutions where these individuals worked, and certainly not the "Good Samaritan" firms the federal government persuaded to put up their own green to bring a mega-corporation floundering in the subprime securities mess on board. "I believe a similar rationale applies to Bank of America, which undertook a takeover of Merrill Lynch in part because federal official[s] urged it to do so," Frank went on to say. "This does not mean that there should always be immunity," he continued, adding, "I am aware of no federal urging that led CEO Ken Lewis of Bank of America to take over Countrywide." 28 Bank of America has faced lawsuit after lawsuit related to the business dealings of Countrywide prior to its 2008 acquisition of the subprime lender from homeowners, investors, even entire states looking to recompense homeowners for what's been deemed by numerous judges as Countrywide's predatory practices. Frank says "it is entirely appropriate for the bank to be pursued on that account." It's the corporate takeovers where the government got involved that Frank finds fault. "[I]n those cases where larger financial institutions absorbed smaller ones at the request of Bush administration officials who understandably sought to minimize damage to the broader economy, it is inappropriate to punish those institutions for prior activities of the entities they absorbed," Frank argued. Regulators goaded the nation's financial powerhouses to take on the most monumental failures of the last decade with forewarnings that otherwise, Wall Street would implode and the U.S. financial system with it. Now, years later, there's nothing of semblance left of these pre-acquisition entities except the losses they caused investors. Yet, officials tasked with investigating the economic upheaval that triggered the Great Recession are placing blame for potentially criminal acts of the now-defunct firms squarely on the shoulders of the companies that rescued them. Frank's public statement ends with him calling on Schneiderman and federal and state officials to "reconsider" decisions to prosecute firms for misdeeds committed by subsidiaries prior to their control when it was the federal government that solicited the acquiring firms' involvement in the first place. "[M]y request for reconsideration of these decisions applies only to those extraordinary cases in which top regulators pressed financial institutions to absorb smaller, troubled entities," Frank stressed. "I am not calling for any change in procedures by the FDIC or other frontline regulators used in the normal course of liquidating failed institutions under its jurisdiction." Frank is retiring from office at the end of December. Joseph Kennedy III (D-Massachusetts), the 32-year-old grandson of Robert F. Kennedy, will replace Frank, representing the Bay State's 4th Congressional District. OCTOBER HOME PRICES UP 4.6% ANNUALLY Home prices were up 4.6 percent annually in October as REO saturation sank to 18.1 percent, according to data provider Clear Capital. REO saturation is the portion of REO sales relative to total sales and fell 23 percentage points since its 2009 peak. Despite the recent positive developments, Clear Capital pointed to a somber reality: Prices nationally are 37.6 percent below their peak levels. This means a home bought for $200,000 in 2006 would be worth somewhere in the range of $124,800 today, the company explained. Nonetheless, recent increases in home prices give consumers hope of a continuing recovery. Prices showed gains in all four regions of the country in October. The West led in Clear Capital's study with the biggest yearly gain (+11.4 percent) followed by the South (+4.2 percent), Northeast (+2 percent), and Midwest (+1.1 percent). Quarter-over-quarter, the West also saw the biggest increase with prices up 3.7 percent. The region made major strides, but Clear Capital says it's still 42.9 percent below its peak. On a quarterly basis, Atlanta was ahead of other major metros as prices gained 8 percent. Atlanta's REO saturation, however, was a high 37.8 percent but dropped 9.7 percentage points in the last six months. Year-over-year, Phoenix posted a strong home price increase of 29.5 percent. STAT INSIGHT $19.4 Billion Mortgage debt forgiven by servicers through September to meet terms of the National Mortgage Settlement. Source: Office of Mortgage Settlement Oversight

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