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.