WASHINGTON – A $26.5 billion settlement between the states’ attorneys general and big banks over the financial finagling with mortgage-backed securities – which led to the economic crash and the Great Recession – is a good first step to hold financers accountable for the wreckage, foreclosures, and evictions they caused, AFL-CIO President Richard Trumka says. It won’t be the last.
The settlement, announced Feb. 9, forces the big banks to turn over the funds to settle the “robo-signing” mess: Some $5 billion to 750,000 victims of illegal bank home seizures in foreclosure where banks did not even review the documents, much less consider evidence that homeowners were current in payments.
The rest will go to mortgage relief for tens of thousands of other homeowners whose mortgages are “underwater” – worth more than the homes themselves. That still leaves other financial frauds that brought the economy down open to prosecution, Trumka and state and federal officials said. And that’s very important, he added.
For example, Calif. Attorney General Kamala Harris is forcing the banks to pay an extra $12 billion to refinance mortgages at lower rates in the Golden State.
All this combined to cheer Trumka. The AFL-CIO was worried the Obama administration would go soft on the banks. He praised the attorney generals’ role.
“The banks broke the law by railroading homeowners through the foreclosure process,” Trumka declared. The settlement gives money to the victims “without requiring individuals to waive their legal claims. The settlement also includes needed principal write-downs, so homeowners can stay in their homes.”
Trumka singled out Harris and New York Attorney General Eric Schneiderman for fighting for a tough settlement. “Because of their efforts, these banks have not been released from liability for fraud and other illegal conduct in creation of mortgage-backed securities that were central to the Wall Street financial crisis. Law enforcers can still investigate and prosecute criminal activity against the banks, and pursue broader civil claims for illegal conduct that brought down our housing market,” Trumka said.
Schneiderman and Obama’s Attorney General, Eric Holder, said they aren’t done with the banks yet. “This will not prevent state and federal authorities from pursuing criminal prosecutions,” Holder said. “I’m confident we have the jurisdiction, the resources, and the will to pursue the people who brought down the economy,” added Schneiderman. A new federal task force pursuing housing finance fraud, which Schneiderman chairs, has already subpoenaed 11 financial firms for their mortgage-backed securities documents.
Photo: “Richard Trumka listens as President Obama addresses union workers.” Charles Dharapak/AP