The people who at least have a line into the national conversation inform me that this potential foreclosure fraud settlement is more than a drill. I’m hearing what Yves Smith is hearing. The meeting next Monday will attempt to bully Democratic AGs to back up their President in an election year. As Marcy Wheeler writes, the meeting will take place in Chicago, the home of the Obama campaign headquarters. I assume that at least some campaign officials will be in attendance.
None of the named principles of this discussion live in Chicago. Thomas Perelli is in DC. Shawn Donovan is in DC. Tom Miller is in IA. Even the banksters are from NY and Charlotte.
The one thing that’s in Chicago, of course, is Obama’s campaign headquarters. (Outgoing Chief of Staff and now campaign Co-Chair and former–future?–JP Morgan exec Bill Daley? He lives in Chicago!)
So to “solve” the foreclosure problem, we’re going to invite a bunch of people–but only the Democrats–to Obama’s campaign headquarter city to hammer out something that really only helps a fraction of those affected.
It’s entirely possible that this is an effort to create the appearance of momentum where none exists. After all, it wasn’t but a week ago that Democratic AGs met among themselves to map out a universe without a settlement. But whether it is members of HUD or Obama for America or DoJ, they will put the full-court pressure on the AGs, assuming everyone shows up (I’m in the midst of confirming that).
Let’s take a step back, then, and explain who these people pushing for a settlement are. Reuters has a helpful primer on this today.
U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.
The firm, Covington & Burling, is one of Washington’s biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for [...]
Reuters reported in December that under Holder and Breuer, the Justice Department hasn’t brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases [...]
A particular concern by those pressing for an investigation is Covington’s involvement with Virginia-based MERS Corp, which runs a vast computerized registry of mortgages. Little known before the mortgage crisis hit, MERS, which stands for Mortgage Electronic Registration Systems, has been at the center of complaints about false or erroneous mortgage documents.
The 1% protects the 1%. That’s all we’re talking about here. The problem for the Administration is that millions of homeowners have paid the price for this protection racket, and there’s an election coming up. So the effort will be made to create a fig leaf of a “solution” to “fix” the housing market and benefit homeowners. We’ve already run the numbers here. Shaun Donovan said the settlement will help 1 million homeowners and 10.7 million are underwater. The settlement has, at most, $20 billion for principal reduction (probably a lot less), averaging out to $20,000 per homeowner, when the average underwater amount is anywhere between $52,000 and $84,000. This is an inadequate settlement, even more so when you recognize that the banks would only have to hit a dollar amount rather than a number of borrowers, meaning that they’ll focus on the biggest houses and reduce the number of people getting relief.
There have been no real investigations to probe the extent of the fraud. Previous deals with the promise of loan modifications in exchange for a settlement resulted in the banks not doing the mods and actively harming the borrowers. And yet there’s this illusion of “momentum” to move forward.
Lots of groups are protesting this. Working America, the community-based affiliate of the AFL-CIO, has a petition up. The Campaign for America’s Future has been working on this as well. There’s still time for Democratic AGs to hold out for a legitimate settlement that doesn’t give away massive liability in exchange for a pittance.