January 9, 2010
Press Office, New York City Comptroller John C. Liu
NEW YORK, NY -- A coalition of seven major public pension
systems called on the boards of directors of Bank of America (NYSE:
BAC), Citigroup (NYSE: C), JP Morgan Chase (NYSE: JPM), and Wells
Fargo (NYSE: WFC) to immediately undertake independent examinations
of the banks' mortgage and foreclosure practices.
Led by New York City Comptroller John C. Liu on behalf of the
five NYC Pension Funds, the coalition also includes the Connecticut
Retirement Plans and Trust Funds, the Illinois State Board of
Investment, the Illinois State Universities Retirement System, the
New York State Common Retirement Fund, the North Carolina
Retirement Systems, and the Oregon Public Employees Retirement
Fund.
The coalition of pension funds called for the banks' Audit
Committees to launch independent examinations of their loan
modification, foreclosure, and securitization policies and
procedures.
"This will help to prevent future compliance failures and
restore the confidence of shareholders, regulators, legislators and
mortgage markets participants," the coalition advised in its
letter.
The coalition members' insistence on immediate action reflects
the urgency of their concerns over mishandled mortgages. In
November, the New York City Pension Funds and Comptroller Liu made
a similar request for bank boards to conduct independent policy
reviews as part of a shareholder proposal to the banks' annual
meetings in the spring.
"The banks' boards cannot continue to pretend the foreclosure
mess is the result of technical glitches and paperwork errors,"
Comptroller Liu said. "There is a fundamental problem in their
procedures that endangers not just homeowners, but shareholders,
and local economies. Given the risks involved, only a swift and
unbiased audit can reassure shareholders that the pension funds of
700,000 working and retired New Yorkers are in safe hands. The
boards of directors have no time to waste."
The coalition represents more than $430 billion in pension fund
investments, including $5.7 billion invested in the four banks.
"We don't know exactly what the banks were doing, and we don't
know if they did it right," New York State Comptroller Thomas P.
DiNapoli said. "Millions of families have lost their homes, and the
investments of the million members of the Common Retirement System
have been put at risk. As investors, we need to understand what
happened. A full and open examination of the procedures used to
foreclose on millions of families is the only way to make sure our
investments are protected and no one is ever wrongfully evicted
from their home."
Federal Reserve Governor Daniel K. Tarullo testified to the
Senate Banking Committee on December 1 that the Federal Reserve's
preliminary findings on bank foreclosure procedures suggested
"significant weaknesses in risk-management, quality control, audit
and compliance practices as underlying factors contributing to the
problems associated with mortgage servicing and foreclosure
documentation."
The Congressional Oversight Panel has estimated that banks'
potential mortgage liability could total $52 billion, borne largely
by the four banks contacted by the pension funds. The Panel's
November 16 report, "Examining the Consequences of Mortgage
Irregularities for Financial Stability and Foreclosure Mitigation,"
concluded that banks' could suffer "disabling damage" if they were
found to have misrepresented the quality of loans sold for
securitization and forced to reabsorb billions in troubled
loans.
"The responsibility for making sure that internal controls and
compliance process are in place for mortgage and foreclosure
practices rests squarely with these Audit Committees," said North
Carolina State Treasurer Janet Cowell. "The recent testimonies and
studies strongly suggest the need for these Audit Committees to act
swiftly and objectively in conducting an independent and
comprehensive review of these practices."
The coalition of pension funds called for the banks to report
the findings of their independent examinations in their 2011 proxy
statements this spring. As of December 31, 2010, the coalition's
combined holdings in each bank included: 97.1 million Bank of
America shares valued at $1.3 billion; 226.6 million Citigroup
shares valued at $1.1 billion; 40.7 million JPMorgan Chase shares
valued at $1.7 billion; and 50.6 million Wells Fargo shares valued
at $1.6 billion.
The New York City Comptroller serves as the investment advisor
to, custodian and trustee of the New York City Pension Funds. The
New York City Pension Funds are comprised of the New York City
Employees' Retirement System, Teachers' Retirement System, New York
City Police Pension Fund, New York City Fire Department Pension
Fund and the Board of Education Retirement System. The New York
City Pension Funds hold a combined 138,786,887 total shares in Bank
of America Corporation (NYSE: BAC), Citigroup Inc. (NYSE: C),
JPMorgan Chase & Co. (NYSE: JPM), and Wells Fargo & Company
(NYSE: WFC) for a combined asset value of $1,933,160,319 as of
12/31/2010.
The coalition's letters to each bank are available on
Comptroller Liu's website:
http://comptroller.nyc.gov/press/2011_releases/pr11-01-003.shtm
(http://comptroller.nyc.gov/press/2011_releases/pr11-01-003.shtm)