Monday, March 5, 2018

Abacus: Small Enough to Jail

via NPR

I highly recommend the Oscar-nominated documentary Abacus: Small Enough to Jail, currently available free to Amazon Prime Instant Video subscribers (affiliate link). It's about the family that runs Abacus Federal Savings Bank ("Abacus"), a small local bank primarily serving the Chinese immigrant community in New York City, and about a prosecution, indictment, and trial arising from the 2008 recession and mortgage crisis. Abacus appears to have been the only bank that was indicted in connection with the mortgage crisis, though only 0.3% of the mortgage loans they sold to Fannie Mae defaulted. Following the 2012 indictment, the bank and the individual defendants that proceeded to trial were acquitted in 2015, found not guilty by a jury on all 184 counts.

I didn't know anything about this story before I watched the documentary. I'll not attempt to assess the merits of the prosecution, except to say that the Manhattan DA's office, under Cyrus Vance (who remains in office) spent at least three years prosecuting this case although there was no monetary loss to Fannie Mae (and in fact some financial gain), given the extremely low default rate on the mortgages at issue. There were some other arguable irregularities in the DA's handling of the case, which you'll see in the documentary. 

Despite the serious subject matter, it was a bittersweet story in the end because the family that founded the bank (a father and several adult daughters, most of whom participated in the defense of the case) was vindicated. I thought the family's interactions were sweet and loving, though everyone certainly had very strong opinions about the handling of the case and sometimes they got annoyed at each other. They were grappling with a period of considerable stress. The legal fees to defend this case case totaled over $10 million

With regards to some of the themes in this documentary, I'm a bit of an outsider. The various Chinese-American and Taiwanese-American communities across the nation are all quite different, so I don't have any special insight into the NYC-area community. I'm not from here, and I'd never presume to speak for them. Yet some of the cultural understandings the documentary touches on, which may not always interact terribly well with bank procedure and regulatory requirements, are familiar. 

One issue that arose was that of certain "gift letters" included with the mortgage applications, often from family members, which are supposed to represent unencumbered gifts. A New Yorker correspondent interviewed in the documentary, who also wrote about this case, explained how the line between gifts and loans can be blurry in this and other immigrant communities. There may not be a real distinction when it's from close family. Say one's mother gives a significant contribution towards a down payment, perhaps the $23,500 shown in a redacted letter. It's very likely the adult child will be taking care of them in the future and paying it back that way. The adult child acknowledges a responsibility to repay, but if it turns out that they can't, well, everyone's family. The correspondent reported that witnesses in the case had trouble articulating this in a way that didn't sound suspicious. An attorney from the DA expresses disgust, that people's family members provided them with money "from who knows where," as if implying something illegal and terrible.

Anyway, it's all a little more complicated than it sounds. I attempted to write a bit more about what is shown in the documentary, but I think it's best for people to watch it for themselves, and also keep an open mind, and recall that the jury did acquit, and that the default rate, whatever the defects in the mortgage applications documents, was 0.3% or less. 

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