Steve Mnuchin and Joseph Otting, the only two CEOs in the short and ignominious history of OneWest Bank, both testified before Congress on Thursday. Mnuchin, already installed as Treasury secretary, answered questions at the House Financial Services Committee. Otting, who is seeking to become head of the Office of the Comptroller of the Currency, one of the most important banking regulators, testified at the Senate Banking Committee.
Both of them lied under oath.
We shouldn’t get numb to that. We shouldn’t become bored with displays of perjury and false statements to Congress, offenses punishable with prison time, according to the United States code. If nobody in the Trump administration bothers to enforce the law, we should do our best to enforce it ourselves in the court of public opinion. For whatever reason, Mnuchin and Otting are comfortable with officially being liars in public settings. And we should ask why that’s so.
In both cases, the lies in question concern OneWest, the properly labeled “foreclosure machine” that caused unnecessary ruin for an untold number of families after the great crash of 2008. I say “untold” because Otting and Mnuchin still refuse to supply basic records of how many families suffered foreclosure at their hands. Several senators asked for this information today without success. Senator Sherrod Brown said that he appealed to Mnuchin six separate times for these records and got no satisfactory response. Brown asked Otting the same question Thursday, and Otting said that the records were in the hands of CIT, which purchased OneWest in 2015, and added that he would “support” release of the data, but “I don’t feel it’s my position to request that information.”
As a mortgage servicer (handling day-to-day operations on loans), OneWest pushed borrowers into foreclosure with bait-and-switch tactics. It presented phony documents to courts as evidence for those evictions. It violated numerous foreclosure laws in California, to the extent that the office of the state attorney general’s consumer-law section wanted to prosecute the bank. In an industry of rogues, OneWest stood out.
But Otting, like Mnuchin before him, maintained that OneWest actually was a white knight, routinely coming to the rescue of homeowners. He touted the low error rate of an after-the-fact review of OneWest’s practices, conducted by reviewers handpicked by the bank under the bank’s own guidelines, and concluded “there’s a false narrative about the OneWest servicing operation.” Senator Brown replied, “It’s a false narrative to you, not to those that lost their homes.”
Brown referred to a 2011 consent order between OneWest and the agency Otting wants to lead, which stated OneWest “filed in state and federal courts numerous affidavits…in which the affiant represented that the assertions in the affidavit were made based on personal knowledge or based on a review…when, in many cases, they were not based on such personal knowledge or review of the relevant books and records.” They also, according to the order, filed documents with courts that were improperly notarized, and not correctly assigned or endorsed to prove ownership.
This is the textbook definition of robosigning. At first Otting dodged the issue, saying that, although he signed the consent order, “we did not confirm or deny the accusations.” But Senator Jon Tester wondered why Otting would sign off on an inaccurate agreement: “I don’t know why you would do that being in business.” So Otting opened up. He said that OneWest had “processes and controls” to review affidavits, though there were “errors from time to time.” He said everything was handled at one location so there could not possibly be problems with notarization because “everybody knew each other.” And he said the affidavit signer “validated principal, past due and amount due” with no errors in every case.
None of this is true. Erica Johnson-Seck, OneWest vice president, testifed on all of this in a deposition in 2009. Among eight people in their office, they signed 6,000 documents a week, mostly affidavits. She proudly boasted, “I have changed my signature considerably.… it’s just an E now,” enabling her to spend “not more than 30 seconds” on each affidavit. It is physically impossible to validate much of anything in 30 seconds of review. In fact, she said outright, “The figures I don’t, I do not check.” She stated she didn’t know who put the figures in the affidavit. She also said that notaries were not in the office when she signed documents, nor are the witnesses.
So Otting just out-and-out lied to Congress, as revealed by what a vice president of the bank he ran said eight years ago.
Mnuchin did the same thing. Representative Keith Ellison asked him about robosigning and Johnson-Seck’s testimony specifically. Mnuchin began by getting huffy about being called a “foreclosure king.” (It’s terrible for folks to remind wealthy financiers of the consequences of their actions.) Ellison asked if Johnson-Seck was under Mnuchin’s supervision. “Not directly,” Mnuchin replied.
“Was she employed under you?”
“She was employed at the bank.”
Mnuchin then said to Ellison, “I don’t think you know what robosigning is,” insisting there is no legal definition, and denied that there was any robosigning at OneWest, “for the record.” Ellison responded that “a person under your direct supervision admitted to it,” and then gave a credible explanation of the practice: signing affidavits that attest to reviewing the underlying material without reviewing them. Maxine Waters asked Mnuchin to apologize to Ellison for presuming that he was too stupid to understand robosigning. (Mnuchin said, “I’m not apologizing to anybody because robosigning is not a legal term and I was being harassed.”)
This is the third time Mnuchin has lied about robosigning to Congress, twice in written statements for the record and now in live testimony. These banking guys think they can get away with this by smugly denying criticisms of their conduct. And they’re probably right. Certainly nobody in the Sessions Justice Department is leaping at the chance to indict.
But when the leading regulators of the major banks in this country are habitual liars, people ought to know. Because if their knee-jerk response to fatal flaws at financial institutions that hurt people is to cover it up, anyone with a mortgage or a bank account should watch their wallet. “You permitted your bank to break the rules while in the process making life harder for homeowners,” Sherrod Brown said. “How do we trust that you won’t allow banks to skirt the rules and harm their customers as their regulator?”
Later in the Senate hearing, Senator Robert Menendez asked Otting if OneWest engaged in “dual tracking,” where banks worked on loan modifications and pursued foreclosure simultaneously, a bait-and-switch that severely harmed borrowers. Otting said it was “an industry practice,” as if breaking the law and crushing homeowners is permissible if everyone else did it too. This is the mentality of a protected class of bank executives who run roughshod over the country with impunity.
The toxic result of the failure to make examples of individual wrongdoing in the banking system that caused millions of foreclosures was never more on display than today. Mnuchin and Otting lie because nobody has ever held them accountable to the truth. We have a “Wall Street executive retreat in the president’s cabinet,” as Brown put it Thursday, because the last president’s cabinet didn’t see justice as a concept worth defending.