Around the Web: Outsourcing Foreclosure `Catastrophe'

You wouldn’t think the leader of the free world would be so willing to outsource a massive foreclosure scandal to state attorneys general, judges, regulators and the big banks that created the mess in the first place.

But that’s exactly what President Obama has done, standing aside while 50 state attorneys general launch investigations, while banks implement their own voluntary moratoriums, announcing they have halted some, but not all, foreclosure proceedings.

A growing number of politicians, civil rights and consumer groups and labor unions have called for a nationwide moratorium amid allegations that banks violated foreclosure laws by using sloppy, false or fraudulent paperwork to kick people out of their homes.

But President Obama doesn’t like the idea of a foreclosure moratorium, which he fears could put the kibosh on his fragile recovery.

Where is the administration’s effort at finding some other creative solution to the mess the big banks have created across the country? What we find instead are regulators that have been ignoring clear warning signs about the banks’ troubled foreclosure crisis.

The federal response so far has been limp at best: a Justice Department inquiry (short of an investigation) and a call by a federal regulator for the banks to voluntarily verify that their foreclosure paperwork is in order.

Recent press reports call into question whether the banks have even implemented the foreclosure moratoriums they promised. Meanwhile more banks, this time Wells-Fargo, acknowledge they have also violated the laws governing foreclosure by submitting unverified documents to take people’s homes. Isn’t there an election coming up where the Democrats are fighting to maintain control of Congress, with their entire agenda at stake? Isn’t there already one party that has expertly cornered the whole do-nothing stick-your-head-in-the-sand approach to unemployment and foreclosure? Doesn’t the president know how awful it looks to most people to have the bailed-out banks getting away with yet more hanky-panky?

You would think the president would want to appear more engaged in this issue that’s so close to the heart of our on-going economic troubles.

His treasury secretary fears “unintended consequences". Apparently the administration would prefer the banks continue to foreclose on people using phony documents. While Wall Street predicts a catastrophe if a moratorium is implemented. If the big bankers want to know who created a catastrophe that will cost them billions, they only need to look in the mirror.

Bank of America (BoA) / Foreclosures / Martin Column / Outrage / President Barack Obama - 10/15/2010

Don’t Dump the Government, Sue It!

When our government institutions fail us through incompetence or corruption – the financial collapse being Exhibit A – what is the solution? That’s the question I posed a few weeks ago.

The Tea Partyers increasingly seem to advocate getting rid of government altogether, or at least the federal government. They (and the health insurance industry) are getting a lot of mileage these days by arguing that the Wall Street debacle shows government cannot be trusted to regulate health care. It’s not a crazy argument, but their solution is.

When government fails, the answer is not to get rid of government, but to force it to work better. How?

To start, citizens should be given “standing to sue” the federal government. It might surprise you to learn that the courts have often rejected the right of citizens to go to court to enforce state and federal laws. When I worked for Congress Watch, the D.C.-based lobbying group founded by consumer advocate Ralph Nader, back in the late 1970s, one of our top goals was to make sure that when Congress passed a law, no matter the subject, it gave Americans the right to sue if a federal agency failed to enforce that law, conducted itself in an arbitrary manner, spent taxpayer money improperly, or if the law was unconstitutional. We were often unsuccessful, defeated by lobbyists for big business who hoped to later subvert the agencies with impunity. Nader has written frequently about this tool of democracy, and it’s also covered in an excellent biography of the Nader consumer organizations by David Bollier that is now available online.

Can you imagine how much economic damage could have been  avoided if citizens had been able to sue the federal agencies that unilaterally stopped regulating the Money Industry over the last decade?

A lot of Americans don’t like litigation – because they have never seen how it can work to protect their interests as consumers or taxpayers. But suing the government is a crucial, even life-saving right that is part of the law in some states, including California. For example, my colleagues at Consumer Watchdog and I sued the California Department of Managed Health Care when it suddenly started permitting HMOs to evade state laws and deny autistic children medically-necessary treatments. The agency’s misconduct began after intense behind-the-scenes lobbying by the heath insurance companies. The trial will be held this fall in a Los Angeles Superior Court and based on a recent preliminary ruling by the judge, we are looking forward to forcing this renegade agency to follow the law.

No doubt the prospect of litigation against the government raises fears of wasted taxpayer resources. But court rules allow judges to block truly frivolous cases. And I believe the costs would be more than offset by the benefits to Americans.

Standing to sue is one of many proposals for systemic reform that you don’t hear much about, because they aren’t sexy. They involve changes to the internal mechanisms of government. But if they were adopted, government would operate far more effectively and with much greater accountability to the public.

Harvey Column - 03/23/2010

Around the Web: Rewarding Fed Failure

Bottom line on the new Chris Dodd reform proposal: much watered down from his earlier proposal and maybe even weaker than the weak House bill.

Here’s the summary from A New Way Forward: “The bill contains no real solution to too-big-to-fail, no real enforcement guarantees, the bad guys are off the hook, the financial system will continue to be as big and dangerous and full of risk taxpayers will likely own. Dodd made a few good steps forward and major steps backwards”. The rest of their analysis is here.

From the Atlantic Wire, a solid roundup of assessments. The takeaway: Too many concessions to the big banks, and it is still faces many obstacles to passage. And who exactly besides Chris Dodd and Wall Street thinks it’s a great idea to house consumer protection within the Federal Reserve? Only last year, Reuters reminds us, Dodd was labeling the Fed “an abymsal failure."

But Elizabeth Warren, the congressional bailout monitor who has campaigned aggressively for strong reform, including an independent agency to protect financial consumers, offered a lukewam endorsement of Dodd’s plan.

I’ll give Alan Sherter the last word. When Dodd says that he doesn’t have the votes for an independent financial consumer protection agency, what he really means is that “lawmakers have more to gain by advocating the interests of banks than those of consumers.”

Around the Web / Consumer Financial Protection Agency / Derivatives / Executive Pay - 03/15/2010