The Obama Administration worked for months on a deal that would have let America's biggest banks off the hook for a crime wave of runaway mortgage fraud. All they had to do in return was pledge a negligible sum of money, to be paid by their shareholders and not themselves, and which they would dispense themselves. In return, crooked bankers received immunity from prosecution - and even from investigation.
After the deal came under attack from a number of its allies, the Administration settled with the banks anyway. But it promised millions of wronged homeowners - and the nation as a whole - that it would move "aggressively" to investigate criminal misdeeds and prosecute bankers and anyone else who broke the law.
That was then, this is now. Two and half months later the Administration hasn't even started to take the inadequate steps it promised it would take. The clock is running out on the statute of limitations and there's no sign that the Administration has lifted a finger to investigate criminal bankers.
Talk vs. Action
The New York Daily News did something simple and smart today - so simple and smart, in fact, that some of us wish we'd thought of it first. It called the Justice Department switchboard and asked for the "Mortgage Fraud Task Force." The operators didn't know what they were talking about. As of a couple weeks ago Eric Schneiderman, the New York State Attorney General who was appointed to the Task Force as the homeowner's champion, didn't even have a phone yet.
The contrast between the talk and the action - or lack thereof - couldn't be clearer. Look at some of the statements made by the President and members of his team when this deal was signed, and compare them to this week's Daily News report:
"The mortgage fraud task force I announced in my State of the Union address retains its full authority to aggressively investigate the packaging and selling of risky mortgages that led to this crisis."
- President Obama, February 9
"On March 9 -- 45 days after the speech and 30 days after the announcement -- we met with Schneiderman in New York City and asked him for an update. He had just returned from Washington, where he had been personally looking for office space. As of that date, he had no office, no phones, no staff and no executive director."
- Daily News
"This investigation is already well underway."
- President Obama, February 9
"None of the 55 staff members promised by Holder had materialized."
- Daily News
"And working closely with state attorneys general, we're going to keep at it until we hold those who broke the law fully accountable."
- President Obama, February 9
"On April 2, we bumped into Schneiderman on a train leaving Washington for New York and learned that the situation was the same."
- Daily News
"[The deal] benefits struggling homeowners now, not some time in the future when the help they need may be too late."
- Senior Justice Department official Bob Ryan, February 9
"Tuesday (April 17), calls to the Justice Department's switchboard requesting to be connected with the working group produced the answer, 'I really don't know where to send you.'"
- Daily News
"This action, while significant, is only one step of many. But this action is momentous."
- Spokesperson for the Department of Housing and Urban Development, February 9
"After being transferred to the attorney general's office and asking for a phone number for the working group, the answer was, "'I'm not aware of one.'"
- Daily News
Small Talk
The Administration only promised 55 staffers for the Task Force, despite the fact that the much smaller Savings and Loan scandal was investigated by roughly 1,000 staffers. But they haven't even met that meager goal. An anonymous Justice Department official told David Dayen, for example, that "at least 50" people were working on mortgage fraud.
Yet when I spoke with David at length on The Breakdown (a great conversation - check out the whole hour) it seemed that a clarification was needed: Did the official say specifically that these 50 people were working full-time on the investigation? No, said Dayen. Did he say whether they were professional staff, support people, or another type of employee? No. (They clearly weren't telephone operators.)
And let's not mince words: There's a reason why a judge in Louisiana recently called Wells Fargo "highly reprehensible" as she slapped it with a $3.1 million judgement. As her ruling makes perfectly clear, the bank cheated its customers, broke its contracts, and then spent a fortune in court trying to wear the plaintiff down.
That's how they all operate. An audit in San Francisco found that 84 percent of foreclosures were performed illegally,reports Reuters, while 4500 out of 6100 mortgage documents studied in North Carolina showed "signature irregularities" (a clear warning sign for fraud).
As we were saying, there's a reason for the judge's outrage: These guys are slime balls.
In the face of such wanton crookedness and downright evil, the Administration's overall handling on bank fraud is quickly moving from disappointing to disillusioning even for some of its most diehard supporters. After all, it's been three years since the banks' crimes have come to light. Where are the prosecutions?
Watchdogs
And fraud isn't the only area where the White House is failing. Here's what President Obama said on February 9:
"We're going to make sure that the banks live up to their end of the bargain. If they don't, we've set up an independent inspector, a monitor, that has the power to make sure they pay exactly what they agreed to pay, plus a penalty if they fail to act in accordance with this agreement."
Unfortunately it looks like monitor Joseph Smith isn't being given much of a staff, either, although he tried to put a positive spin on it. American Banker interviewed Smith and reported that "Smith said he wants to keep his own staff small and rely heavily on contractors to help him review the self-monitoring work that must be done."
But the pool of contractors is small. Although Smith says he wants to avoid hiring the "usual suspects," most of the candidate firms will have a built-in conflict of interest. They all depend on the big banks themselves for a large chunk of their revenue. Smith's role is temporary but Wall Street's is permanent - and they all know it.
What's more, all of the large accounting firms have signed off on inaccurate (if not downright fraudulent) financials for the big banks in the past. (See some reflections on bad accounting firms and our own work experience in "Law and Order: AIG.") Are these firms really expected to police dishonest bankers?
Pyramid of Failure
The Administration has already retreated on key elements of Dodd/Frank, the financial reform bill which was already too weak to protect the world's economy from crooked behavior and too-big-to-fail banks. (Here's one recent example; Here's another. ) Its HAMP program was a cruel disappointment, and now we've learned that its "Hardest Hit Fund" has only paid out 2 percent of the money that was allocated to help unemployed homeowners. The only real action seems to be taking place on the state level, but most local officials and state Attorneys General have also been asleep at the switch.
The enforcement failure is dramatic, it is systemic, and it is taking place at every level of government. The chain of failure leads straight to the top. We heard a lot of talk in February but there's been no perceptible action since then. The only concrete thing to come out of this settlement so far is that the banks got a cheap ticket out of the litigation death trap brought on by their own criminality.
This settlement was always profoundly flawed, but it provided some opportunities for further action - or we were told it did. But there's very little evidence anybody's acting on these opportunities - and time is running out.
________
The coalition of progressive groups that worked to improve the original settlement (disclosure: I work for one of them) is now urging people to contact the White House to let them know what they think about the Administration's lack of action.(The White House comment line is  202-456-1111, by the way.) Attorneys General in each state should also get a call, too, and a question: What are you doing to investigate crooked bankers?
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future and the host of The Breakdown, broadcast Saturdays nights from 7-9 pm on WeAct Radio, AM 1480 in Washington DC.
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
President Obama is a million times better than our GOP alternatives, but has been no better than what used to pass for a Republican on most issues. Nixon, even Reagan, would have done more to reign in Wall St and the banks.
The minute Summers and Geithner were selected, this outcome was set in stone like King Arthur’s sword. And this time, nobody was going to get access to try and pull it out.
A little tough talk is our consolation prize for tough luck.
It’s incredibly difficult to accept this apparent betrayal on such a monumental issue. We all know that the runaway malfeasance of the banks and Wall St was the primary creator of monumental damage to the global economy, and still, nobody has the guts to hold them accountable. They get a free pass, and we get the guarantee that they’ll do it all again. The same system of crony capitalism remains firmly entrenched and completely in control of our government.
300 million phone calls won’t fix what 300 million dollars buys off to leave alone. The only “change we can believe in” is going to come from massive nonviolent protests.
We voted for a bare-knuckle Lincoln brawl, and got a pillow fight instead.
Yet, no bonus left behind...
"the Administration's overall handling on bank fraud is quickly moving from disappointing to disillusioning even for some of its most diehard supporters."
Is this not an unprecedented cover-up plain and simple?
"the financial reform bill which was already too weak to protect the world's economy from crooked behavior and too-big-to-fail banks."
Meanwhile the too-big-to-fail banks have grown even bigger.
"The clock is running out on the statute of limitations and there's no sign that the Administration has lifted a finger to investigate criminal bankers."
What is the statute of limitations on burglary? Murders have been convicted decades after the fact. Financial crimes tend to be particularly covert - cooked books, many layers of obfuscation. There is no broken window, no corpse in a pool of blood; yet real people suffer. It can take years to untangle or even detect financial crimes (look at Madoff). That is, until the excrement hits the impeller. Why are prosecutors not given the time that they need to unravel white collar crime?
check with your attorneys folks
http://www.youtube.com/watch?v=NHBNxWlRTCw
Still, when I read this article I get the impression you think the administration is slow or maybe a bit incompetent. Please consider that protecting the banksters is exactly what the administration intends.
http://www.totalnoid.com/2009/12/27/strategic-default-morgan-stanley-gives-properties-back-to-the-lender/
Strategic Default: Morgan Stanley Gives Properties Back to the Lender
The borrowers that walk away aren't "crooked", because they didn't go into the deal with the intention of committing fraud, nor are they committing fraud after the fact... the banks however have done and are doing just that.
Did you actually BELIEVE Axelrod's Hope and Change slogan?
Do you actually BELIEVE a guy who must read everything he says?
Have we all gone mad?
That's all that people can do right now. That's the control we have at the moment.
But our elected leaders in Washington are huffing and puffing their outrage over the $900K GSA party while the clock is ticking on any legal accountability for Wall Streets 9 Trillion dollar party.
I've said it before and I'll say it again....when the next Too Big To Fail institution falls -- is there any sane person who thinks this won't eventually happen? -- and takes the rest of the economy down with it, the blame will reside solely with Obama for standing by and doing nothing to prevent it from happening. He's supposedly a smart guy.....why doesn't he see that this is going to be his legacy?
It bears repeating: The White House comment line is 202-456-1111. Contact the White House to let them know what they think about the Administration's lack of action.
I know those involved will act in their best interest at my children’s expense. I will pursue justice in the court of public opinion to protect my children’s interest. I would like to resolve this matter amicably, as my ordeal does not speak well for FEMA, the Office of the Comptroller Currency, the Department of Justice, or Congress. My claim in regards to the Office of the Comptroller Currency response will be particularly damming. Mr. President because my ordeal involves multiple federal and state agencies you are the only reasonable person I can turn to for assistance. I can provide additional evidence in support of my contentions per request.
I respectfully request that you consider the entire record when reviewing this case for a possible favorable outcome. If you are able to affect such a decision, please contact me. Thank you in advance for your consideration.
Sincerely,
Destiny
How do you prosecute mass delusion?
This wasn't just an American delusion. There were property booms throughout the world. See Ireland or Spain for example.
In an election year very little will be done on this issue mainly because there was little to no actual fraud; just another bubble.