Courtesy of Pam Martens.
Eugene Ludwig's Estate in the Foxhall Section of Washington, D.C.
When dazzlingly credentialed consultants are paid over $2 billion by some of the largest banks in the country to ostensibly restore trust among consumers by making a serious effort to root out foreclosure fraud and provide just restitution to the victims, what one doesn’t expect is for the exorbitantly paid consultants to trigger a Senate investigation, national media probes, two critical reports by the General Accountability Office and an explosion of outrage by foreclosure victims on hot social media sites.
While the government’s so-called Independent Foreclosure Review resulted in seven firms being hired by banks and mortgage servicers, the consultancy firm taking the brunt of the scrutiny, and rightfully so, is Promontory Financial Group. Its business model is only slightly less dangerous than the too-big-to-fail banks that employ it for everything from cost-cutting to regulatory reviews.
Promontory Financial Group was founded in 2001 by Eugene Ludwig and Alfred Moses, two long term partners of Covington & Burling, a law firm with intimate ties to Wall Street banks. Ludwig, who serves as CEO at Promontory today, had worked at Covington for two decades before being plucked by President Clinton to head the Office of the Comptroller of the Currency (OCC), the Federal agency overseeing national banks. Ludwig is not the only former partner of Covington to serve as chief of the OCC. John Dugan, who has returned to Covington to chair its Financial Institutions Group, headed the OCC from 2005 to 2010 – the critical period leading up to and including the collapse of major Wall Street banks.
Ludwig headed the OCC from 1993 to 1998. He, along with other Wall Street sycophants like Robert Rubin, Larry Summers and Alan Greenspan, championed the deregulation of Wall Street and the repeal of the Glass Steagall Act. Ludwig testified as follows before the House of Representatives on March 5, 1997 on the topic of deregulation and banks enjoying a subsidy from their FDIC insured deposits:
“…we should not let an unsupported hypothesis that banks enjoy a subsidy dissuade us from pursuing financial modernization. And we should not let an unsupported hypothesis dissuade us from adhering to a fundamental principle that should underlie modernization: Financial institutions need the freedom to manage their activities and structure their operations in a way that best suits their needs and the needs of their customers. Allowing these institutions to engage in new activities on the one hand but imposing an artificial structure on the other will impede rather than promote safety and soundness. It will not limit any more effectively their use of the alleged subsidy, even if the subsidy actually existed. And it will impose substantial costs and inefficiencies on the financial services industry that limit the industry’s ability to prosper, to serve America’s consumers and communities, and to compete in the global marketplace.”
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