In a dramatic expression of public anger at the growing foreclosure crisis Cook County Sheriff Thomas Dart yesterday refused to enforce foreclosures issued by big banks. Earlier in the week, the Bank of America and GMAC mortgage announced a resumption of proceedings against homeowners in 23 states.
“I can’t possibly be expected to evict people from their homes when the banks themselves can’t say for sure everything was done properly,” Dart said in the statement according to CNBC.
In the recession of the 1980s, sheriffs like James Trafficant of Youngstown, Ohio, made national news when refusing to foreclose on unemployed steel workers, recognition that gained him a seat in Congress and later a federal jail cell for racketeering.
Big banks, in a rush to foreclose on as many homes as possible, urged mid-level bank officials to employ “robo-signing,” which means putting signatures on hundreds of thousands of documents without bothering to read them.
Driven by the demand for maximum profits, banks, says the Washington Post, “penalized processors if they foreclosed too slowly. The firms that worked the quickest received bonuses from the banks that employed them and higher marks from credit-rating agencies. According to court papers filed in the many cases brought against the banks and the processors, some processing firms hired people essentially off the street to come in and sign documents.”
Federal and state investigators are now looking into filing criminal charges against the banks for fraud as a movement grows for maintaining a national moratorium on foreclosures.
The White House, treading carefully, declined to support the moratorium demand after several leading Democrats in the House lent their names to the call. Officials however, took pains to indicate support for holding those responsible for possible financial fraud accountable. The New York Times writes, “Robert Gibbs, the White House press secretary, said that the administration was ‘strongly supporting the investigation by the state attorneys general’ while noting that the Federal Housing Administration and Financial Fraud Enforcement Task Force have undertaken their own investigation.”
A meeting of federal regulators on the crisis is being held at the White House today as worries about the impact of the crisis on the overall economy increase with some economists warning of another full-scale collapse.
Institutional Risk Analytic’s Chris Whalen, at an American Enterprise Institute conference in early October warned of growing systemic risk. “The U.S. banking industry is entering a new period of crisis where operating costs are rising dramatically due to foreclosures and defaults. We are less than one quarter of the way through the foreclosure process,” he argued.
“Rising operating costs in banks will be more significant than in past recessions and could force the U.S. government to restructure some large lenders as expenses overwhelm revenue. BAC, JPM, GMAC foreclosure moratoriums are only the start of the crisis that threatens the financial foundations of the entire U.S. political economy.”
Growing public pressure to hold the banks accountable and rescue homeowners on one hand, and finance capital’s need to maximize profits to maintain stability on the other, underlie the current contest of political wills.
Meanwhile the banks’ managers will receive a four percent pay raise this year, totaling a whopping $144 billion.
Photo: In 2008 Cook County Sheriff Tom Dart stood with tenants of a foreclosed apartment building in Chicago when he announced he’d stop sending his deputies on court-ordered mortgage foreclosure evictions because many of those forced from their homes were renters who faithfully paid their rent. Al Podgorski, Chicago Sun-Times/AP