Sherry Hunt never expected to be a senior manager at a Wall Street bank. She was a country girl, raised in rural Michigan by a dad who taught her to fish and a mom who showed her how to find wild mushrooms. She listened to Marty Robbins and Buck Owens on the radio and came to believe that God has a bigger plan, that everything happens for a reason.
She got married at 16 and didn’t go to college. After she had her first child at 17, she needed a job. A friend helped her find one in 1975, processing home loans at a small bank in Alaska. Over the next 30 years, Hunt moved up the ladder to mortgage-banking positions in Indiana, Minnesota and Missouri…
In November 2004, Hunt, now 55, joined Citigroup as a vice president in the mortgage unit. It looked like a great career move. The housing market was booming, and the New York- based bank, the sixth-largest lender in the U.S. at the time, was responsible for 3.5 percent of all home loans. Hunt supervised 65 mortgage underwriters at CitiMortgage’ sprawling headquarters in O’Fallon, Missouri, 45 minutes west of St. Louis.
Hunt’s team was responsible for protecting Citigroup from fraud and bad investments. She and her colleagues inspected loans Citi wanted to buy from outside brokers and lenders to see whether they met the bank’s standards. The mortgages had to have properly signed paperwork, verifiable borrower income and realistic appraisals.
Citi would vouch for the quality of these loans when it sold them to investors or approved them for government mortgage insurance…
By 2006, the bank was buying mortgages from outside lenders with doctored tax forms, phony appraisals and missing signatures, she says. It was Hunt’s job to identify these defects, and she did, in regular reports to her bosses…
In March 2011, more than two years after Citigroup took $45 billion in bailouts from the U.S. government and billions more from the Federal Reserve — more in total than any other U.S. bank — Jeffery Polkinghorne, an O’Fallon executive in charge of loan quality, asked Hunt and a colleague to stay in a conference room after a meeting.
The encounter with Polkinghorne was brief and tense, Hunt says. The number of loans classified as defective would have to fall, he told them, or it would be “your asses on the line.”
Hunt says it was clear what Polkinghorne was asking — and she wanted no part of it…“All a dishonest person had to do was change the reports to make things look better than they were,” Hunt says. “I wouldn’t play along.”
Instead, she took her employer to court — and won. In August 2011, five months after the meeting with Polkinghorne, Hunt sued Citigroup in Manhattan federal court, accusing its home-loan division of systematically violating U.S. mortgage regulations.
The U.S. Justice Department decided to join her suit in January…On Feb. 15, 2012, the bank agreed to pay $158.3 million to the U.S. government to settle the case.
Citigroup admitted approving loans for government insurance that didn’t qualify under Federal Housing Administration rules. Prosecutors kept open the possibility of bringing criminal charges, without specifying targets.
Citigroup behaving badly as late as 2012 shows how a big bank hasn’t yet absorbed the lessons of the credit crisis despite billions of dollars in bailouts, says Neil Barofsky, former special inspector general of the Troubled Asset Relief Program.
“This case demonstrates that the notion that the bailed-out banks have somehow found God and have reformed their ways in the aftermath of the financial crisis is pure myth,” he says.
As a reward for blowing the whistle on her employer, Hunt, the country girl turned banker, got $31 million out of the settlement paid by Citigroup.
Please read the whole article. It’s a great piece of work by the Bloomberg crew led by Bob Ivry. It’s long, detailed, exposing the lack of ethics and a willingness to ignore rules, regulations and half-hearted oversight in the bowels of the world’s biggest banks. Optimizing profits is always the excuse. But, criminal behavior ain’t excused by any of the rationales.
Certainly better than anything we hear from our elected clownshow in Congress, this signposts the yellow brick road followed by America’s leading capitalists all the way to the greatest financial collapse since the Great Depression. Produced and directed by the same folks who are telling us Mitt will make it all better by duplicating the same policies.