Is President Obama going to try to sell us another bank bailout in his State of the Union address tonight?
Of course, he won't call it a bailout. He'll tout it as “the largest multi-state settlement of charges of wrongdoing against corporate malefactors in history;” something that sounds important and unprecedented.
But don’t be fooled, a bailout is exactly what Obama administration officials are scheming, under the guise of settling foreclosure fraud charges against the big banks.
The fraud stems from widespread robo-signing in which banks used forged documents or had employees sign off on documents they hadn’t read.
The Obama administration has been pressuring state attorneys general to end a joint federal-state investigation with a sweetheart deal that would amount to another bailout for the banks – rewarding them again for their bad behavior, this time with a light slap on the wrist.
Unlike in 2008, we know a lot more about how government officials under the influence of Wall Street misbehave. When administration officials met privately with state AGs Monday in Chicago, they were met with protestors, and a number of groups have been mobilizing phone calls to the White House and state AGs.
Let me give you some perspective: Banks have made hundreds of billions off the adjustable, high-interest loans they pawned off on borrowers, then sliced and diced and resold to investors until the bankers’ shenanigans sank our economy. Now the Obama administration wants to settle with them for between $19 and $25 billion in fines. Some of that money could be sent directly to 750,000 borrowers who were found to be victims of robo-signing. But there haven’t any thorough investigations to determine the full scope of that scandal or how many people were actually effected. Part of the money could be used to reduce principal (by a piddling $20,000) for a small number of homeowners, and some could be used to pay housing counselors, who provide advice for people facing foreclosure.
But as in previous foreclosure reduction efforts and previous settlements with the banks, enforcement and accountability are completely lacking.
And while $19 to $25 billion may sound like a lot of money to us, to the bankers, it’s pocket change: It’s neither punitive nor a deterrent.
This foreclosure deal is so bad that Kamala Harris, the California AG who is a close ally of the president’s, walked away from it, promising instead to join with Nevada’s AG to scrutinize the bankers’ foreclosure practices more closely.
In doing so, Harris is behaving like real law enforcement official, not a bank apologist. Like any prosecutor, she knows she has to have solid evidence in hand before she talks about a plea bargain.
A handful of other state AGs are expressing skepticism about the proposed settlement, but the Obama administration continues to pressure the AGs to settle before the banks’ behavior is fully investigated and understood.
As MIT economist and Baseline Scenario blogger Simon Johnson told Dave Dayen at Firedoglake, “Why go small when you have a strong case for fraud?”
Harris isn’t the only one who walked away from what she saw as a shabby deal for her constituents. The New York AG, Eric Schneiderman also balked, and when he started to question the deal, he was booted off the negotiating committee. What particularly disturbed Schneiderman was the notion that as part of a proposed settlement, banks would get immunity from lawsuits, not only relating to robo-signing, but for other mortgage-related fraud as well.
“I wasn't willing to provide a release that ... released conduct that hadn't been investigated, essentially,” Schneiderman told National Public Radio. Schneiderman has started his own investigation.
Initially the joint state-federal investigation looked like it had teeth. Back in 2010 when the process began, Tom Miller, the Iowa AG who headed the multi-state task force, stated bluntly: “We will put people in jail.”
Remember what Deep Throat told investigative reporters Woodward and Bernstein during Watergate: Follow the money.
After Miller launched that initial investigation of the banks’ foreclosure practices, he raised $261,445 from finance, insurance and real estate interests – more than 88 times as much as he’d raised before the investigation. Not all that much money in the scheme of things, but apparently enough to inspire him to back off. Now Miller is leading the settlement juggernaut.
Where we see fraud, our leaders see financial opportunity.
We can’t let Miller and the Obama administration let the banks off the hook again at our expense. We want thorough, transparent investigations and indictments where appropriate.
Please call the White House today and tell them that if it walks like a bailout and quacks like a bailout, we’ll know it’s a bailout, no matter how administration officials try to dress it up.
And we don't want any more bailouts.