A20 Economy & Business


EZ RE


Madoff trustee alleges J.P. Morgan aided fraud


BY BOB VAN VORIS J.P. Morgan Chase, Bernard


Madoff ’s “primary banker,” was sued Thursday for $6.4 billion by the trustee liquidating the imprisoned con man’s former firm. Irving H. Picard, the lawyer


appointed as trustee by a New York bankruptcy court, said he sued J.P. Morgan over claims that the bank aided and abetted Madoff ’s fraud. Picard said his suit seeks $1 billion in fees and $5.4 billion in damages. “J.P. Morgan was willfully


blind to the fraud, even after learning about numerous red flags surrounding Madoff,” Da- vid J. Sheehan, counsel to Picard, said in the statement. Any money recovered from


J.P. Morgan will be returned to Madoff ’s victims on a pro rata basis, said Picard, who has recovered about $1.5 billion for Madoff creditors. “The complaint filed today by


the trustee for the Madoff es- tate blatantly distorts both the


facts and the law in an attempt to grab headlines,” said J.P. Morgan, the second-biggest U.S. bank. “J.P. Morgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff.” J.P. Morgan, based in New


York, said it has assisted Picard in his investigation of Madoff ’s firm and called his claims “ir- responsible and over-reaching.” The lawsuit was filed under


seal in U.S. bankruptcy court in Manhattan, according to Picard’s statement. The suit is the second-largest


filed by Picard in the Madoff bankruptcy, after a $7.2 billion claim he filed against investor Jeffry Picower in May 2009. Picower died in October


2009. Picard faces a Dec. 11 dead-


line for filing suits to recover false profits. Madoff, 72, is serving a 150-


year sentence in a North Caroli- na federal prison after admit- ting he directed the biggest Ponzi scheme in history. — Bloomberg News


KLMNO


FRIDAY, DECEMBER 3, 2010


Banks’ legal right to foreclose is questioned Pooled mortgages


muddle loan ownership, House panel is told


BY ARIANA EUNJUNG CHA The systemof pooling and sell-


ing mortgages around the world has caused widespread confusion about who owns the loans and raises questions about whether banks insome caseshave the legal standingtoforeclose,astatejudge and consumer attorneys testified beforeCongress onThursday. New York State Supreme Court


Justice Dana Winslow said that “standing has become such a per- vasive issue” in the cases he sees “that I frequently use the term ‘presumptive mortgagee’ ” to de- scribe the entity trying to fore- close. Rep. John Conyers Jr. (D-


Mich.), chairman of theHouse Ju- diciary Committee, emphasized that as of last year, about 2.5 mil- lion homes had been lost to fore- closure and that projections esti- mate that as many as 13 million homes will be lost to foreclosure by the time the crisis abates.


GET 2HOURS FREE PARKING IN THE CHEVY CHASE PAVILION PARKING GARAGE WITH ANY STEIN MARTPURCHASE


MARK RALSTON/AFP VIA GETTY IMAGES


Families facing eviction over the holidays staged a protest outside one of the homes last week in Long Beach, Calif.


“Yet the big Wall Street firms,


other mortgage lenders and ser- vicers, and FannieMae and Fred- die Mac — all of whom received taxpayer bailouts to the tune of billions of dollars over the last couple of years — have in many instances turned a blind eye to- ward homeowners in similar fi- nancialdistress,”Conyers said. Winslow, academics and attor- neys defending homeowners de-


scribed a fundamental problem that goes beyond recent revela- tions of shoddy paperwork and “robo-signing” in foreclosure cas- es. They said there is a much broader question about the legali- ty of designating a single compa- ny,Mortgage Electronic Registra- tion Systems (MERS), as the hold- er of mortgages and then trading these loans to investors around the world without updating the ownership documents in local clerk offices. They said it is unclear whether


using this system has stripped those investorsof the right tofore- close on homeowners who miss theirpayments. University of Utah law profes-


sor Christopher L. Peterson said MERS has a “problematic legal foundation” because it under- mines state recording laws. Peter- soncalledMERSa“deceptive”and “anti-democratic” institution be- cause it also uses thousands of employeeswhoworkformortgage lenders, servicers and lawfirms to sign mortgage paperwork in the name of MERS. That practice is alsocloudingtheownershipof the loans,he argued. “Howis ahomeowner tounder-


standwithwhomthey can negoti- ate a settlement, or fromwhomto obtain additional information, or


how to distinguish a legitimate employee from the thousands of mortgage-related con artists and charlatans?”Petersonasked. Merscorp, which owns MERS,


andthefinancial services industry have said that numerous courts have upheld the legality of the systemtheyusetotrackandtrans- fermortgages. “The chain of title starts and


stops with Mortgage Electronic Registration Systems, Inc. as the mortgagee.MERS,as theagent for the note-owner, holds legal title for the note-owner in the land records,” the company said in a recent statement. “The use of MERS is in compliance with the statutory intent of the state re- cording acts.” Peterson called on Congress to


bar Fannie Mae and Freddie Mac from purchasing MERS-recorded loans, echoing legislation intro- duced by Rep. Marcy Kaptur (D- Ohio) last month. The industry has designatedMERS as its proxy injurisdictionsacross thecountry, and the company’s name appears on about 60 percent of all U.S. mortgages. Fannie and Freddie own or


guarantee the vast majority of mortgages that are originated to- day.


chaa@washpost.com


the perfect Your holiday


Valid through 12/5 Take An EXTRA


20% Rewards Certificates. Cannot be 7002001020120318


Valid through 12/5 Take An EXTRA


25%


All Red Dot Clearance


Valid on select items. Not valid on previously purchased merchandise. May be used with Stein Mart MasterCard®


Rewards certificates.


Coupon must be surrendered at time of sale. Cannot be combined with other coupon offers. Coupon cannot be duplicated. Offer valid through 12/5/10 in participating stores. Not for use by Stein Mart associates.


7002001025120396 off


Any2 Regular Price or Sale Items


off


One time use per transaction on two regular price or sale items. Excludes Panache Gift Cards, Fabulous Finds, Skechers Shape-ups, BOGO golf balls & online purchases. Not valid on previously purchased merchandise. May be used with Stein Mart MasterCard®


combined with other coupon offers. Coupon must be surrendered at time of sale. Offer valid through 12/5/10 in participating stores. Coupon cannot be duplicated. Not for use by Stein Mart associates.


gift shopping destination USE THESE MONEY SAVING COUPONS TO SAVE YOU MORE!


Valid through 12/5 Take An EXTRA


Any2 Regular Price or Sale Items


20% Rewards Certificates. Cannot be 7002001020120318


Valid through 12/5 Take An EXTRA


All Home Red Dot Clearance


50% Rewards 7002001050120360 For your nearest Stein Mart store visit www.steinmart.com or call 1-888-steinmart


Valid on Home Clearance items. Not valid on previously purchased merchandise. Cannot be combined with other coupon offers. May be used with Stein Mart MasterCard®


certificates. Coupon must be surrendered at time of sale. Offer valid through 12/5/10 in participating stores. Coupon cannot be duplicated.


off off


One time use per transaction on two regular price or sale items. Excludes Panache Gift Cards, Fabulous Finds, Skechers Shape-ups, BOGO golf balls & online purchases. Not valid on previously purchased merchandise. May be used with Stein Mart MasterCard®


combined with other coupon offers. Coupon must be surrendered at time of sale. Offer valid through 12/5/10 in participating stores. Coupon cannot be duplicated. Not for use by Stein Mart associates.


JAHI CHIKWENDIU/THE WASHINGTON POST Shoppers carry their wares near the ColumbiaHeightsMetro station inWashington last week. Consumers looking less wary consumers from A1


is not a one-time flash in the pan. All the signals are all moving in the correct direction.” There is still a long march to


return to pre-recession condi- tions, however. The stagnant job market remains one of the princi- pal drags on the economy. The monthly unemployment rate is slated for release Friday and is expectedbyeconomists toremain unchanged at 9.6 percent. During the Great Recession, a


wave of job losses combined with sinkinghomepricesandavolatile stock market battered consum- ers, the driving force of the na- tion’seconomicgrowth.Spending on everything from fast food to designer clothes slumped. Since then, consumers have trodden warily, slowing the pace of recov- ery.


But signs of a turnaround are emerging. The jump in pending home sales in October offered hope that the housing market is on the mend, even if those sales are at a significantly lower level overall from the boom years. The National Association of Realtors said Thursday that its index of pending home sales, which re- flects the number of signed con- tracts to buy existing houses, rose 10.4 percent in October to 89.3. The index peaked inMay 2006 at 112.6. “The housing market clearly is


in a recovery phase and will be uneven at times, but the improv- ing job market and consequential boost tohouseholdformation will help the recovery process going into 2011,” said Lawrence Yun, the association’s chief economist. Meanwhile, major stock index-


es have largely recouped their losses from the financial crisis and are up more than 60 percent from their lows in the spring of 2009. On Thursday, investors cheered several positive econom- ic reports, sending theDowJones industrialaverageupnearly 1 per- cent a day after a 2.3 percent gain. The wave of positive economic


news has helped boost consumer sentiment. A monthly survey by Reuters and the University of Michigan came in more cheerful than expected, rising to the high- est level since June. Improvement in consumer sentiment typically translates


Retail chain store sales Percentage change in sales


compared with the same month a year earlier: +10%


+2 +4 +6 +8


-2 0


5.8% Pending home sales


Index based on contracts signed in that month*


100 120


20 40 60 80


N D J F M A M J J A S O N ’09 2010


0


NOTE: Only includes stores open at least a year. Excludes Wal-Mart. SOURCES: International Council of Shopping Centers, National Association of Realtors


into gains in actual spending. Al- most all of the roughly 30 retail chains that reported monthly sales at established stores Thurs- day experienced a solid boost in November. Target posted a 5.5 percent jump in sales compared with a year ago, when they dropped 1.5 percent. Macy’s said sales shot up 6.1 percent, with 4.5 million visits to its Web site on Black Friday. The returns are “bolstering our


confidence,” Macy’s chief execu- tive Terry J. Lundgren said in a statement. According to an analysis by the


International Council of Shop- ping Centers, a trade group, monthlysales for all the reporting chains rose 5.8 percent, the big- gest increase in eight months. Retailers reported heavier traffic in stores and online as they began touting holiday sales just before Halloween. The council said last month’s resultswereso encourag- ing that it is considering raising its annual forecast of holiday sales as much as a percentage point. MichaelMcNamara, vice presi-


Topic: Nat/econ./biz


dent of research and analysis for MasterCard Advisors Spending- Pulse, which tracks consumer spending, said he was also en- couraged by the types of retail that have seen improvement. Sales ofwomen’s clothing, hitpar- ticularly hard during the reces- sion, rose 3.9 percent in Novem- ber, according to his data. That suggests women feel confident


O N D J F M A M J J A S O THE WASHINGTON POST


2009 2010 *Seasonally adjusted.


enough in the future to spend on themselves again, McNamara said. In addition, he said, shoppers


consumer3-g.AAA PROOF1


Run Date: 12. 03. 10 Size: 2col x 3.25 inches/278 x 227 pts Artist: Tobey


FPO


previously split their dollars be- tween buying newgoods and pur- chasing services, such as hotel rooms and airline tickets. But now both sectors are reporting stronger sales instead of seesaw- ing. “There’s somewhat more dura-


bility to this wave than where we were before,”McNamara said. Leading the way in consumer spending has been auto sales, demonstrating that Americans are more willing to open their wallets and borrow money to buy big-ticket items. General Motors, Chrysler and Ford enjoyed dou- ble-digit percentage gains in sales last month, on top of a strong October.


Economists cautioned, howev-


er, that Americans should not ex- pect to rewind to 2007. But specu- lation of a double-dip recession— widespread just a fewmonthsago —has largely died down amid the stream of positive data. “You put it all together and I


think it tellsastory ofaneconomy that is shaking off the doldrums,” said StuartHoffman, chief econo- mist for PNC Financial Services. “It’s broad-based enough and the trends are there to suggest that this isn’t a false start.” Instead, he said, he prefers to


see the glass as half-full — and filling up.


muiy@washpost.com 89.3,


up 10.4% from


September


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100  |  Page 101  |  Page 102  |  Page 103  |  Page 104  |  Page 105  |  Page 106  |  Page 107  |  Page 108  |  Page 109  |  Page 110  |  Page 111  |  Page 112  |  Page 113  |  Page 114  |  Page 115  |  Page 116  |  Page 117  |  Page 118  |  Page 119  |  Page 120  |  Page 121  |  Page 122  |  Page 123  |  Page 124  |  Page 125  |  Page 126  |  Page 127  |  Page 128  |  Page 129  |  Page 130  |  Page 131  |  Page 132