An Enforcer For the 99 Percent?

 California’s attorney general, Kamala Harris, has staked out the high ground in promising to hold bankers accountable and protect borrowers in the continuing foreclosure crisis.

So far she’s formed a mortgage fraud task force and walked away from the weak settlement with the banks over mortgage servicing fraud that the Obama administration and the majority of state attorney generals have been trying to foist on the public.

Then earlier this week she told the executive who oversees Fannie Mae and Freddie Mac, the federally bailed out quasi-public agencies, he should quit if he won’t consider principal reduction as a tool to help underwater homeowners.

Here’s hoping that Harris can build on the foundation she’s laid.

She has a real opportunity to set herself apart from other Democratic Party politicians, from the president to the congressional leadership and others who have opted for strong PR rather than real enforcement.

But she has her challenges ahead of her.

An ambitious politician who chaired the president’s campaign in California in 2008, Harris will have to go against the political grain if she really wants to hold bankers accountable and fight for homeowners.

Prosecuting bankers is never easy. Her agency, the state attorney general’s office, has had a woeful record on consumer protection. It’s been a long time since John Van de Kamp, when he was attorney general, launched his aggressive antitrust campaign.

As we know, bankers have been lubricating the political system to protect themselves against the consequences of the excesses. They spare no expense in hiring legal talent and defend themselves with a self-righteous fury. The legal system has had an unfortunate tendency to show great deference when the lords of the universe show up.

But as William Black, the former bank regulator turned law professor, has pointed out, it can be done. Bankers can be held accountable. It was done after the savings and loan debacle in the 1980s.

If prosecutors have the tenacity, the resources and the chops, they can go after bankers like they do gang members. First you go after the less powerful, more vulnerable players, squeezing them to gain information, and find documents to gradually build cases against the higher-ups.

Harris will be at a disadvantage without federal help – when prosecutors decide to take out a gang, they form a multiagency task forces, using all the agencies of federal, state and local officials.

We’ve seen just how disinterested the feds are in going after bankers. Local prosecutors around the country haven’t shown much stomach for the job either.

But if she is pursues her task in a determined and savvy way she will find wide and enthusiastic support among a crucial group that have become disenchanted with other politicians – the 99 percent.

If you’re in the Los Angeles and you want to hear more about this from William Black himself, he’s scheduled to participate in a stellar panel at Occupy LA at City Hall moderated by Truthdig’s Robert Scheer. Black, a law professor at University of Missouri-Kansas City, will be joined by Michael Hudson, Joel Rogers, a professor of law, political science and economics at the University of Wisconsin, and via live stream, Michael Hudson, a financial analyst who also teaches economics at UM-KC.

 

California Attorney General Kamala Harris / Martin Column / Occupy - 11/05/2011

Channel surfing at the White House

I went to the White House Friday week for a full day listening and talking back to top White House officials with about 100 Democratic activists and organizers from California, organized by the Courage Campaign.
The White House folks seemed to listen hard. Gathered in an auditorium in the Eisenhower Executive Office Building, we heard from top staff including chief of staff Bill Daley, senior advisors David Plouffe and Valerie Jarrett, EPA chief Lisa Jackson, and Labor secretary Hilda Solis, along with other staff on specific issues. They asked us not to offer specific quotes from people, but they didn't offer up any juicy secrets or stray from the administration talking points we've all heard before.
They got an earful of what they have certainly heard before as well: like many others across the country, we wanted the president to fight harder for bolder programs to reduce unemployment and address the foreclosure crisis.
There were a series of breakout sessions on a variety of issues: immigration, lesbian and gay rights, labor and environment. But the concerns were the same. Would the president fight harder? When would he compromise and how much would he give away? I was disappointed that the White House didn't offer a breakout session on a especially critical issue for Californians: the foreclosure crisis.
According to the White House, President Obama doesn't get credit for how he hard he has fought against tough foes and and an economic crisis he didn't create. They cited his recent, trip to the bridge between Rep. John Boehner's and Sen. Mitch McConnell's districts where he channeled former president Ronald Reagan, exhorting the Republican leaders, "Help us repair this bridge."
I keep wishing President Obama would channel FDR, who thought that government could actually work with people to solve problems, instead of Reagan, who preached that government was itself the problem, and that it should be starved, shrunk and gotten out of the way.
Channeling one of Reagan's pithy phrases might be OK, but we'll never reduce unemployment right now using the Gipper's approach.
For that, we'll need the fearless, positive, can-do approach of FDR, who knew that government could help when the private sector wouldn't. He never achieved his goal, according to William Leuchtenberg, in Franklin D. Roosevelt and the New Deal. That was to put ALL unemployed Americans in the Depression to work. His programs only created jobs about a third of them, but not for lack of trying.
Not all of his program was so simple, but some of it was. For example, he gave unemployed white-collar workers jobs teaching people to read.
While he didn't face the monolithic, intransigent opposition President Obama faces in Congress, he offered a bold and pragmatic vision that included vilifying the bankers whose wild speculation threw the country into Depression, and acknowledging that the country was a in a deep crisis that would require dramatic, sustained government action.
Measuring Obama's Jobs Act by the standard of what FDR was able to accomplish, you can see how his proposal falls short. If Republicans passed it whole, which is unlikely, it would create at most 1.9 million jobs, providing work for nowhere near one-third of the nation's unemployed.
Obama's plan appears to be motivated by fear - fear of failure, fear of Republican rejection, fear of alienating independent voters, when what we need is audacity.
It does not seem to be motivate by an audacious vision of government action that would actually get the country back to work.

The jobs plan still might not pass, but what people are hungry for, more than bipartisanship, is that audacious vision that Obama promised and FDR delivered.
Has President Obama been so busy channeling Reagan that he forgot what FDR said about fear?
Mr. President, tune in to the right channel!

Martin Column / Outrage / Uncategorized - 09/26/2011

Bold Lite

Maybe President Obama's jobs plan will succeed in making congressional Republicans look bad before the 2012 election, especially if they reject it and demonize it as another socialist plot.

But even in the unlikely event that the congressional Republicans pass it whole, would the president's $440 billion grab bag offer significant solutions to Main Street’s most pressing problems – reducing the unemployment rate and halting the foreclosure crisis?

Probably not.

It’s true that the president and his administration did not dig the deep economic hole the country is in. And the president deserves some credit for stepping out of Washington’s deficit obsession bubble just long enough to recognize that nothing the government has done so far has been enough to lift those outside Wall Street out of that hole – the worst economic downturn since the Great Depression.

But throughout his administration, and again last night, he has not offered big enough shovels, to dig us out of it.

As Paul Krugman [who labels the plan “a lot better than nothing”] points out, the collapse of the housing bubble blew a  $1 trillion a year hole in the economy, a hole that last night’s jobs plan won’t come close to filling.

But a comparison of the jobs plan’s $440 billion price tag with the unsuccessful $16 trillion bank bailout suggests its relative timidity. Remember that the federal government handed over that money to the bankers with no strings attached and no questions asked.

While the administration likes to tout the bank bailout’s success by bragging that most of the money has been repaid, by its most important measure – ensuring that the banking system helped restore the Main Street economy - it remains a costly failure.

Still you have to at least acknowledge that the bank bailout was a bold scheme. The same can’t be said for the American Jobs Act, which as the president stressed, was a collection of non-controversial proposals that even corporate Republicans have endorsed in the past.

Call it Obama’s “bold lite.”

Yes, it was bolder than what the president has suggested since the original $700 billion stimulus. It includes $240 billion of tax cuts and about $200 billion in infrastructure spending and aid to local governments, along with regulatory review, a vague housing scheme, plus a significant new round of budget cuts to pay for it, including unspecified threats to Medicare.

According to an estimate by Economic Policy Institute, the new plan, if passed whole, would create 2.6 million new jobs over the next several years and prevent the loss of another 1.6 million jobs.

That’s not chopped liver – but the country is still staggering under the weight of persistent 9 percent unemployment, with 14 million Americans unemployed, another 8.8 million working part-time but seeking fulltime work, and another 2.6 million who don’t show up in unemployment numbers because they’ve given up looking for work. In addition, we face a continuing foreclosure crisis and the threat of future budget cuts.

While I hope that the congressional Republicans don’t just decide to block the proposal, experience suggests that they are stuck on that strategy as a way to undermine the president. Will “a lot better than nothing” be good enough to help millions of Americans for whom the recovery has only been a mirage? Or is the president setting himself up, and the rest of us, for another round of dashed hopes and failure?

Uncategorized - 09/10/2011

3 Steps Toward Real Economic Recovery

Democrats should be less worried less about Sarah Palin’s mangling of American history and more concerned about the Obama administration’s consistent underestimation of the recession since the financial collapse.

The president and his team has been downplaying the seriousness of the jobs and housing crises since they took office, repeatedly taking inadequate steps to address the twin fiascoes of foreclosure and unemployment, while wrongly conceding to Republicans that the political focus should be the short-term deficit.

This is not only bad for the country but bad politics for the Democrats, increasing the chances that voters will blame them for not fighting harder for programs to create jobs and straighten out the housing mess. Never mind that Republican efforts to address these issues amount to less than zero.

Nobody expects the president and his party to win every fight. But we do expect him not to wave the white flag before the fight starts.

Circumstances still offer the president opportunities to show that he finally gets it – and to signal a more aggressive approach.

First, the president can launch a fight for Elizabeth Warren to head the Consumer Financial Protection Agency. Warren is popular, articulate and sensible, and the agency was her idea in the first place. Of course the Republicans hate her, in fact they don’t want a single head of the agency. Republicans favor a committee to run the agency, the more easily for the banks to bamboozle it.

Second, he can replace his outgoing economic adviser, Austan  Goolsbee with somebody more tuned in to the jobs and housing crises. How bad was Goolsbee (and the administration’s economic policies he defended)?

Here’s how economist Firedoglake blogger Scarecrow put it after listening to Goolsbee Sunday, saying it was up to the private sector to create jobs now because government could do nothing: “If I’d been asleep for the last decade and woke up to ABC This Week’s interview of Presidential economic advisor Austan Goolsbee, I would assume that Mitt Romney won the 2008 election, that he was predictably following Republican dogma about how to recover from a severe financial collapse and recession...” Scarecrow wrote.

With Democrats like these, who needs Republicans?

Third, Obama can fire his Treasury secretary, Timothy Geithner, who has shamelessly pandered to his banker cronies while ignoring Main Street’s woes since he helped engineer the bailout as head of the New York Fed prior to the Obama administration.

Of course it will take more than gestures and a few appointments for the president to tackle the continuing severe economic challenges we face. But he can still saddle up and take a brave ride on the right side of history, if he chooses.

 

Consumer Financial Protection Agency / Martin Column / President Barack Obama - 06/06/2011

P.R. Won't Fix Foreclosure Mess

Will one of the nation’s too big to fail banks succeed in buying its way out of a shameful scandal stemming from dozens of improper foreclosures of military families and overcharging thousands more?

J.P. Morgan Chase, which hauled in $25 billion in the bailout, is in full damage control mode, paying out $56 million to settle a class action brought by military families – about $4,500 per family – and temporarily lowering mortgage interest to 4 percent for other military families.

But the bank is still facing a federal investigation stemming from the allegations. Whether the Justice Department finds the nerve to hold accountable one of the big banks remains an open question.

It hasn’t so far, despite evidence of widespread fraud in the bank’s use of robo-signers who verified the accuracy of thousands of foreclosure documents without ever reading them.

But our political leaders haven’t worked up the courage to call it what it is.

The bank had no choice but to acknowledge it had screwed up. To show just how serious it was about doing right by the nation’s fighting men and women, J.P. Morgan Chase appointed an actual commission with some real-life celebrities on it, including retired general William McChrystal and former football legend Roger Staubach.

The Justice Department has no excuse not to go after J.P. Morgan and other banks that have been violating the Servicemembers Civil Relief Act, which is supposed to keep military families safe from foreclosure while they’re on active duty. Military families have been particularly hard hit by the foreclosure crisis, with 20,000 facing foreclosure last year, a 32 percent increase since 2008.

Federal investigators just made the Justice Department’s job easier – in a recent study GAO found more than a couple of dozen improper foreclosures of military families. You might not think that sounds too bad, until you realize they found those bad foreclosures in an examination of just 2,800 foreclosure files.

Instead of pretending that the foreclosure mess is just going to sort itself out on its own, our political leaders need to acknowledge how deep a hole the big banks have dug for the rest of us to figure a way out of.

We don’t need more hapless PR. A realistic first step would be a foreclosure moratorium. If anybody else but the big banks were engaged in these kind of shenanigans, it would just be labeled what it is: fraud, plain and simple.

 

Around the Web / Foreclosure / Martin Column - 05/09/2011

The Never-Ending Bailout

Even though banks' super-charged profits and eye-popping bonuses are back, they want you to keep paying the costs of their foreclosures.

In California, where the foreclosure crisis has hit with brutal force, it will cost communities between $600 billion and $1 trillion in lost property value, almost $4 billion in lost property tax revenue, and over $17 billion in local government costs between 2008 and 2012, according to Ellen Reese, a University of California Riverside sociologist and Jan Breidenbach, who teaches housing policy at USC, writing in the San Bernardino Sun.

That amounts to be about $20,000 per foreclosure that local governments [meaning you] have to pay every time a bank forecloses on a home.

One California legislator has made a modest suggestion: have banks pay those costs at the time of the foreclosure, so taxpayers don’t have to absorb them later.

The way the banks have responded, you would think that the legislators had proposed seizing the banks and distributing the bankers’ money on Main Street.

The mortgage bankers’ association, in best fear-mongering fashion, told its members that making the banks pay the costs of their failed loans would dry up all future home lending in the state.

In her April 6 letter to her membership, the association’s president, Pam Sosa, doesn’t offer any suggestion how the costs banks are currently passing on to you and me could be mitigated.

Meanwhile the California Bankers’ Association says if the bill becomes law, they’ll simply pass the cost on to their customers.

Why should the banks have to pay when they’ve done such a stellar job convincing the politicians that you won’t mind picking up the tab for the bankers’ losses?

If you thought that the financial collapse would curtail the banks sense of entitlement to write their own rules for their business, you would be wrong.

If you thought that the financial collapse would have made the banks think twice before demanding that we pay the costs when their business goes south, their reaction to AB 935, sponsored by San Fernando Valley Democrat Bob Blumenfield, demonstrates that you would be wrong.

Of course, the real purpose behind AB 935 is not to get the banks’ money. It is provide more of a financial incentive to the banks to work out sustainable modifications that would allow homeowners to remain in their homes. The Obama administration’s Home Affordable Mortgage Program has had little success in encouraging banks to modify loans because in part, the incentives it offers to the banks are too small But the banks find it tough to make their case on the merits. They can’t argue they don’t have enough money to pay their own way. Instead they rely on fear tactics and the inside game, which has served them so well in getting legislators and regulators to water down efforts to crack down in the wake of the financial collapse. In the depths of the recession in California, at the same time bankers were collecting billions in bailout, they were spending $70 million in lobbying fees and campaign contributions to thwart or weaken legislation that would have protected homeowners in the foreclosure process.

Testifying earlier this week on behalf of AB 935, economist and blogger Mike Konczal described foreclosures as a “lose-lose situation.” A foreclosure fee that accurately covers the real costs the community will have to pay will encourage more sustainable modifications, he said. He also debunked the mortgage bankers’ argument that it would have an impact on new lending, because it will only be applied to already existing loans. Citing recent Federal Reserve statistics, Konczal said relatively few homeowners are actually walking away from their “under water” homes, “and are willing to pay to do right by their communities and their promises. It would be great to have a financial system that met them halfway."

But the banks disagreed. They fought back hard on AB 935. Late Tuesday, Peggy Mears of Alliance of Californians for Community Protection sent around an email to say that the legislation appeared to be dead for the year, stuck in legislative committee.

 

 

 

 

 

 

 

Financial Crisis / Foreclosure / Martin Column - 04/26/2011

Feds Unsettle Foreclosure Abuses

Wall Street is apparently about to win another round as federal regulators prepare to sign off on a “slap on the wrist” settlement stemming from widespread abuses in the foreclosure process.

The settlement continues the federal policy of relying entirely on the banks’ voluntary compliance, despite repeated examples of banks using fraudulent and forged documents to foreclosure on homeowners. The settlement apparently imposes no fines.

“Judges don’t tell burglars to go design their own plan to stop breaking into people’s homes and report back in 30 days,” said Rev. Lucy Kolin of the PICO National Network in response to the settlement, which is supposed to be announced later this week. “A judge would get laughed off the bench if they did this, and yet this is exactly what the Fed, OCC and FDIC have chosen to do.”

At Credit Slips, Georgetown Law prof Adam Levitin first labels the proposed settlement “Potempkin regulation,” then decides the better analogy for where we are on bank regulation is the “inmates running the asylum.”

The Obama administration’s lack of enthusiasm for holding the big banks accountable doesn’t exactly come as a surprise. Dog bites man.
They were supposed to working with the 50 state attorneys general to investigate the extent and impact of the foreclosure problems, but the attorneys general and the Fed have yet to conduct an investigation worthy of the name, as if they were investigating violations of law, which they should be. If the Feds and the AG's insist on negotiations with the banks, negotiation without robust investigation is a recipe for disaster.

What’s left unclear by reports of the proposed settlement is whether the state AGs are now free to pursue investigations and remedies on their own or whether the settlement will undercut them.

That’s especially relevant in places like California, where the state’s new attorney general, Kamala Harris, ran a strong election campaign promising to protect homeowners from foreclosure abuses and to hold banks accountable. During the “negotiations”, Harris hasn’t had much, if anything, to say. Her office hasn’t been returning my calls.

Now that the Feds have once again caved in to the big banks, Harris will have the opportunity to keep her campaign promises and enforce the law equally. Homeowners will be counting on her.

 

 

Around the Web / Federal Reserve / Foreclosure / Martin Column - 04/07/2011

From Prosecutions to Peanuts

It was only last December that the head of a 50-state attorney general investigation into foreclosure fraud boldly told homeowner advocates, “We will put people in jail.”

That was Tom Miller, Iowa attorney general, who added, “One of the main tools needs to be principal reductions, just like in the farm crisis in the 1980s…there should be some kind of compensation system for people who have been harmed…And the foreclosure process should stop while loan modifications begin.  To have a race between foreclosures and modifications to see which happens first is insane.”

That was then. Now Miller is backing off his tough talk, replacing it with a strategy of negotiating with the big banks and a bunch of federal agencies to come up with a settlement.

The amount of the potential settlement is $20 billion, according to press reports.

Gone is any notion of prosecutions.

There’s been a lot of discussion about whether this amount is too high or too low. The banks contend that they might have been sloppy about their paperwork but they foreclosed on only a few people who hadn’t been making their mortgage payments. No harm, no foul.

But homeowner advocates and critics are outraged, arguing that the banks are guilty of more than slovenliness, they violated laws intended to protect consumers. You can’t pass laws that require banks to follow certain procedures and then allow the banks to flout them. That reinforces one of the most corrosive aspects of the bailout and its aftermath – that the system is rigged so that the banks don’t have to follow the law.

Not to mention that $20 billion is pocket change to the big banks and won’t go far in modifying the mortgages that they refused to touch so far.

In addition, any fund that is controlled by the banks rather than a responsible government agency is a recipe for continued inaction by the banks.  See the disastrous Obama Administration HAMP program, which is somewhere between an abject failure and an actual scam that rips off homeowners.

Miller’s retreat is not the only distressing signal coming from the foreclosure front. Here in California the new state attorney general, Kamala Harris, made the strong protection of homeowners in foreclosure a key plank of her campaign. Yet her office recently signed off on a feeble $6.8 million settlement of a lawsuit against Angelo Mozilo and another top official of Countrywide Financial who presided over that company’s orgy of subprime lending before the financial collapse.

$5.2 million of the money goes into a restitution fund for victims. Mozilo and his president, David Sambol, admitted no wrongdoing. They’re not on the hook for the money- Bank of America, which bought Countrywide will pay it for them.
As David Dayen points out on Firedoglake, the settlement was probably inherited from her predecessor, the present governor, Jerry Brown. But that doesn’t mean she has to tout such a pittance as some great victory for the state.

It’s just a very small drop in a bucket with a very big leak in it.

If you live in California, you can call Harris’ office and suggest she stop caving into predatory lenders and start living up to her campaign promises.

Wherever you live, please contact your attorney general and remind them they are, after all, not the bankers’ buddies, but the people’s prosecutors.

Here are numbers where you can reach your state attorney general.

 

Around the Web / Foreclosures / Martin Column / Outrage - 03/04/2011

Will Afghan Bailout Trump U.S. Homeowners?

At least you know where the Tea Party stands. If it’s a government program, they want to end it.

The Democrats are murkier. They propose tepid solutions to serious problems like the foreclosure crisis, then when their programs don’t work it, ends up reinforcing the Tea Party’s arguments that government doesn’t work.

So the Tea Party-driven Republicans come along and want to whack the Obama administration’s failed foreclosure prevention scheme known as the Home Affordable Modification program. They would probably want to whack it even if it was working, but that’s another subject.

The Tea Party doesn’t offer anything in its place. Homeowners are pretty much on their own at the mercy of the banks.

So much for the American Dream.

Many people have pointed out that the HAMP program is something between an abject failure and a scam that rips off already beleaguered homeowners.

The Obama administration doesn’t offer so much of an argument in its defense as a hapless shrug. In this video, Treasury Secretary Timothy Geithner acknowledges that the foreclosure prevention program amounts to a “tragic, terrible mess.”

But hey, the administration says, it’s better than nothing.

Meanwhile, the foreclosures continue while authorities investigate massive fraud by the banks in the foreclosure process.

This is not a debate calculated to offer much confidence that our public officials can deal effectively with the problems that afflict those of us who live in the reality-based community.

I was reflecting on this tawdry spectacle while reading about the latest developments in the latest “too big to fail” bank bailout to strike at U.S. taxpayers – this one in Kabul, Afghanistan. My colleague Harvey Rosenfield warned about this brewing fiasco several weeks ago.

Apparently the wildly corrupt officials and their cronies used the bank as their private piggy bank, and the bank’s imminent collapse is now a greater threat to Afghanistan’s security than the Taliban.

As recently as last September, officials were offering assurances that U.S. taxpayers would not have to pay for a bailout. Now apparently if we don’t cough up $1 billion the war and the country will be lost and all the previous billions we’ve squandered there will have been wasted.

So we can’t afford a dime to help homeowners in this country but we must spend $1 billion to bail out the Afghans.

I don’t expect the Democrats to put up much of a fight against such an outrage.

I hope the Tea Party stands strong on this one.

 

 

 

Around the Web / Foreclosures / Martin Column / Outrage / Too Big To Fail - 03/02/2011