Led by Iowa Attorney General Tom Miller, who has apparently abandoned promises to put bank officials in jail, dozens of state officials from around the country are meeting in Washington next week to finalize a multibillion-dollar settlement with bank executives for allegedly widespread mortgage and foreclosure abuses. But with two million homeowners already evicted and five million more facing foreclosure this year, advocacy and policy groups, including BanksterUSA and the National People's Action network, are stepping up pressure for a settlement that imposes stiff sanctions, criminal penalties and forces banks to renegotiate mortgages—and helps financially those who were alreadly illegally forced from their homes.
But there are mounting signs of disputes among federal oversight agencies over the scope of any punishment and fines for bank officials, and that's considered an ominous sign by critics of a likely weakening of the ongoing state attorneys-general settlement talks with the banks. As George Groehl, the executive director of National People's Action told The Huffington Post: "There's no reason to go to all this trouble and not take that final step. It's mind-boggling for them to be considering letting all these guys off the hook."
To protest that outcome, the 600 or so state and local leaders coming to Washington next week for the National People's Action strategy conference to fight economic inequality and tax-dodging banks will be mounting an action that also targets the state attorneys-general. "We're asking them to fight foreclosures and to demand a strong settlement," says Monica Trevino, NPA's communications director.
The organization last month already garnered attention for generating nearly 9,000 signatures to state attorney general offices, and a deluge of phone calls with the basic message: "Crime Shouldn't Pay." The petition outlined the basic demands:
Your investigation is the best hope for homeowners and communities since this crisis began. Americans are watching. Our expectations are high that we will see justice for the millions of families who have lost their homes, the millions more who are at risk of foreclosure, and the neighborhoods across the country devastated by falling housing values and vacant properties as a result of widespread mortgage fraud.
The bank executives who committed fraud should be prosecuted. Any settlement needs to go beyond fixing paperwork, fully addressing ongoing abuse and ending the flood of unnecessary foreclosures.
We demand that any overarching settlement agreement contain mandatory loan modification programs, including principal reduction for owner-occupant families facing foreclosure and remedies for those families who have already lost their homes.
Now is the time for bold leadership from the nation’s Attorney Generals to hold big banks accountable for the damage they have done to families, communities and the nation’s economy.
In reality, though, as Firedoglake, The Huffington Post and the New York Times, among others, have reported, federal agencies notoriously sympathetic to banking interests, including the Treasury Department and the toothless Office of the Comptroller of the Currency (OCC), are pushing for a global settlement that amounts to what critics call a "chump change" deal of $20-$30 billion. Critics say it that isn't likely to directly help those who lost their homes or punish bank officials at all.
As US PIRG's consumer program director, Ed Mierzwinski, declared recently in an outraged blog post:
The OCC, the powerful, but captured, national bank regulator that slept through part of the financial crisis but also used federal preemption to consciously take state consumer cops off the beat when it wasn't ignoring flashing alarms and warnings on its own screens, now wants to let the big banks that participated in the predatory mortgage mess get away with robbery.
The OCC, which outrageously has also ignored the follow-on servicing/foreclosure scandal, wants the state attorneys general to agree to a sweetheart settlement with its own national banks that have also violated numerous state laws. The new Consumer Financial Protection Bureau and other regulators want tougher penalties.
As Firedoglake, drawing on news reports and a GAO study, points out, the settlement will likely be enforced by the same Treasury Department that completely bungled earlier mortgage assistance programs, often leading homeowners to get booted out of their homes more quickly if they participated in the Treasury-run program. This same department is now going to run a new, supposedly mandatory program with "quotas" for banks to renegotiate mortgages -- and it's shaping up to be another regulatory system banks are getting ready to game by largely helping those homeowners who face the fewest difficulties. (Hat tip to Firedoglake for citing this point from a Washington Post article:)
But forcing the banks to reduce the principal on distressed loans could pose its own problems. Some people familiar with the discussions are concerned that if banks are required to meet a loan quota, they would put the top priority on modifying mortgages for borrowers who need relatively little help. By doing so, the banks could limit the losses they face in reducing the principal on loans.
“It creates some potential strange choices for the servicers,” one source said.
Mary Bottari of BanksterUSA, a project of the Center for Media and Democracy, explained last month just what's at stake in these negotiations, but the goals of reformers seem likely to be undermined bythe agency in-fighting underway, especially with jail time for bank officials now seemingly off the table:
Rumor has it that the 50-state attorney general investigation into the Fraudclosure scandal is wrapping up. It's time for a backbone check. Will the state attorneys general just ask the big banks and service providers to turn over a chunk of change from seemingly bottomless pockets? (This strategy was pursued by the Security and Exchange Commission (SEC) with little impact). Or will Iowa Attorney General Tom Miller take the lead in wrestling a real settlement out of the banks so that families hammered by unemployment and underemployment can stay in their homes?...
State AGs can take a series of actions that the Feds have failed to take. First of all, they can book the crooks and force top officers to trade pinstripes for jail stripes. Secondly, they can force the banks into settlements with individual homeowners that really take a bite out of their profits, complete with foreclosure redos and damages for harmed homeowners. They can also subject the banks to ongoing independent audits of their foreclosure procedures and they can demand that the banks force principle write downs and other across-the-board measures that will stabilize communities and the economy.
Next week's protests aim to remind this gathering of state law enforcers just how important to their home-owning constituents -- and their re-election chances -- standing up to bank officials in a meaningful way can be for the economies of their states.
UPDATE: The National People's Action group has also joined in supporting SEIU"s "Where's the Note" campaign to inform homeowners about their rights to protect themselves from illegal foreclosures:
UPDATE II: On a related front, Matt Taibbi at Rolling Stone explores why no one at the Wall Street firms that engaged in massive securities and accounting fraud is headed to jail: in part, a cozy, revolving door relationship between SEC and Justice Department officials and their former colleagues now representing the Big Banks. He observes about this indifference to prosecution that echoes the inaction over foreclosure fraud:
Nobody goes to jail.
This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth -- and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.