Backbone. That is part of what’s been missing over the past few years, and particularly the last few months, as politicians and public officials wavered in the face of the financial and political tsunami’s that have rocked the the country.
As a result, notwithstanding evidence of massive fraud on the part of the big banks, not a single person or institution has faced criminal charges or gone to jail. Significantly, that may be about to change.
Reports indicate that New York Attorney General Eric Schneiderman has opened an investigation into Wall Street banks mortgage operations. Schneiderman’s request for information from three major Wall Street banks, Bank of America, Goldman Sachs and Morgan Stanley, signals that the N.Y. AG has backbone.
As bank executives were scheming and loan-sharking their way to billions from subprime and other mortgage plots, real people spent their money for the “American dream” of home ownership.
The banks’ predatory lending practices, much of which was systematically racist, have gone from a mortgage crisis to a foreclosure and eviction crisis, which according to at least one report, has caused the “greatest loss of wealth for communities and individuals of color in modern U.S. history.”
People are being kicked out of their homes, illegally in many cases, across the country by the same institutions that caused the economic chaos. The banks’ mortgage servicers are pushing through foreclosures using numerous questionable, and even illegal, ways such as “robosigning,” an electronic signature system, which enables banks to (illegally) transfer mortgages without recording them with state governments.
State governments have had to deal with this economic and political fallout. Attorneys general of all 50 states are demanding the major banks and their mortgage servicers pay compensation for their fraud and illegal consumer lending practices.
But the banks are pushing back hard, taking advantage of any and all divisions between the attorneys general, and between the states and federal governments.
For example, federal bank regulators, signed their own settlement with eight of the nation’s largest mortgage servicing companies in April.
According to numerous reports, the settlement negotiated by the Office of the Comptroller of the Currency, an “independent bureau” of the U.S. Department of the Treasury tasked with regulating banks, is “weak,” and lacks any real enforcement or supervision. It is not expected to help struggling homeowners, and falls far short of what the AGs had put on the table.
What the AGs had demanded was $20 billion in compensation (banks made $25 billion in mortgage servicing fraud) and most significantly, reductions on the highly inflated principal, which by some estimates could cost banks up to $160 billion.
While the lead AG, Iowa’s Tom Miller, had said the OCC settlement wouldn’t derail the states case, it seems to have. Last week, Miller proposed “new terms” to the top five mortgage servicers that “drop some controversial provisions of their first attempt at a settlement, including a push to force banks to reduce principal on thousands of mortgages,” according to American Banker. Republican AGs oppose the demand to reduce mortgage principals.
With all this jockeying, many say it’s doubtful that the AGs will force a settlement anytime soon. The banks seem to have the upper hand. And while the AGs have been working with the new federal Consumer Financial Protection Bureau, a product of financial reform law and much hated by Wall Street and Republicans, Washington seems anxious to let the banks move on and get back to foreclosures and more wealth transfers.
Enter Schneiderman. He has said he would not be party to any deal — AG-negotiated or otherwise — that precluded his “office from pursuing claims against the banks relating to their mortgage origination, securitizations and marketing practices,” according to The New York Times.
Despite abundance of evidence that reckless and fraudulent behavior by banks and other financial institutions contributed to the U.S. housing meltdown, and triggered the current global financial and economic crisis, these cartels are operating with impunity.
People are suffering all over, except in the people in the corporate suites. As filmmaker Charles Ferguson said as he accepted his Academy Award for “Inside Job,” no one has gone to jail for the massive fraud. Outrageous!
If Schneiderman’s investigations exacts justice he deserves the nation’s applause and support.