MoveOn.org and other groups are declaring President Obama’s announcement of a new task force to investigate foreclosure fraud a significant victory.
These groups deserve credit and thanks for mobilizing people to call the White House and state attorneys general and organizing protests to push back against a weak proposed settlement of foreclosure fraud charges against big banks, without having first fully investigated the allegations.
But before we get too carried away with the celebrations, I think it’s worth examining the president’s announcement with a healthy dose of skepticism.
Because we’ve heard it all before.
In 2009, the Obama administration convened, with great fanfare, the “”Financial Fraud Enforcement Task Force,” which included officials from the Justice Department, Treasury, Housing and Urban Development, and the Securities and Exchange Commission.
Announcing the task force, U.S. Attorney General Eric H. Holder said it mission was to the mission was to prosecute the financial fraud that led to the 2008 economic collapse.
“Mortgages, securities and corporate fraud schemes have eroded the public's confidence in the nation's financial markets and have led to a growing sentiment that Wall Street does not play by the same rules as Main Street,” Holder said.
State attorneys general then formed their own mortgage fraud working group to work with federal authorities.
These previous efforts haven’t produced noteworthy results – no criminal charges have been brought against major bank executives, and no major policy changes have been put in place to force banks to help homeowners.
The 2009 task force was not exactly targeting the titans of Wall Street. As these high-profile task forces like to do, this one gave its “operations” hokey names like Operation Stolen Dreams and Operation Broken Trust that make everybody but the prosecutors cringe.
Touting Operation Broken Dreams in 2010, prosecutors bragged that it had netted 330 convictions related to mortgage fraud – but it focused on borrower, not bank fraud. While Operation Broken Trust focused on investment fraud, among its 343 criminal cases, it focused on lower-level fraudsters.
There was not a single case against a Wall Street banker.
While prosecutors often build cases against higher-ups using those lower in the food chain, that doesn’t seem to be the case with the 2009 task force.
In other words, the 2009 task force hasn’t done anything that would interfere with the flow of political contributions from Wall Street.
Evaluating the task force’s work, the Columbia Journalism Review found it more publicity stunt that real prosecution effort.
Meanwhile, the state AG’s efforts stirred MoveOn.org and other organizations to action. A handful of state AGs are balking at the inadequate proposed settlement, and California’s attorney general, Kamala Harris has joined with Nevada’s attorney general in walking away from the proposed settlement and pledging a real investigation into the foreclosure mess.
There are plenty of other reasons to be skeptical of the President’s newly- anointed task force, rounded up here by Dave Dayen on Firedoglake. While one of its co-chairs, New York Attorney General Eric Schneiderman, appears to be the genuine deal in his intention to crack down on financial crime, he’s being babysat (co-chaired) by two administration lawyers with dubious backgrounds when it comes to getting tough on bankers.
Robert Khuzami, head of enforcement at the SEC, used to be general counsel at Deutsche Bank, overseeing its huge risky investments in mortgages. Shouldn’t Deutsch Bank be a prime target of the task force?
At the SEC, he’s presided over several settlements that appeared to be overly generous to banks. Another other co-chair is the head of Justice’s criminal division, Lanny Breuer, who has been apologist in chief for the agency’s lack of aggressiveness in going after too big to fail bankers.
As a private lawyer, Breuer worked at the Washington D.C. law firm Covington & Burling, which represented too big to fail banks Bank of America, Well Fargo, Citgroup and JPMorgan Chase as well as MERS, the Mortgage Electronic Registration Service, a concoction of the real estate finance industry that runs a vast computerized registry of mortgages that has been at the center of complaints about false and fraudulent documents in the foreclosure process.
Breuer and Khuzami both played prominent roles in the president’s previous financial fraud task force, as members of its securities and commodities fraud working group.
The bottom line is that the new task force is only needed because of the abject failure of the administration’s previous efforts to prosecute the fraud at the heart of the financial meltdown.
According to statistics gathered by Syracuse University’s Transactional Records Access Clearinghouse, despite all the prosecutors’ puffery about their inanely named operations, financial fraud prosecutions fell to a 20-year low in 2011, continuing a decade-long downward trend.
If this new task force is not going to be a fraud itself, Khuzami and Breuer have to go. They should be replaced by real prosecutors without close ties to the big bankers.
Though you wouldn’t know it from the Obama administration, people like that do exist.
Blogger Abigail Field nominates two crackerjacks – Neil Barofsky, the tough former inspector general of the bailout, and Patrick Fitzgerald, U.S. attorney for the northern district of Illinois, who has successfully pursued several high-profile cases, including the perjury conviction of Scooter Libby, former VP Dick Cheney’s chief of staff.
So after you finish that glass of champagne celebrating the new task force, it’s time to get back on the phone. Here’s the president’s number.
Tell the president we don’t need another task force. We need prosecutors who aren’t compromised and who aren’t afraid to do their jobs.