A coalition of housing advocates that supported the state/federal investigation into securitization abuses that accompanied the foreclosure fraud settlement has turned against it sharply, charging the Justice Department with stonewalling the investigation and denying it critical resources that could move prosecutions against leading banks for their role in the housing crash and subsequent economic crisis.
The coalition, including Campaign for a Fair Settlement, the New Bottom Line, and members of the Campaign for America’s Future, have been frustrated with the agonizingly slow pace of the investigations into the Residential Mortgage Backed Securities (RMBS) working group for some time. But the focus on DoJ, and Eric Holder in particular, is new, and frankly a bit implausible.
It was fairly clear to some of us when the RMBS working group was announced inside a revived financial fraud enforcement task force that it would be a repository for existing investigations that could be re-branded as “going after the banks” in an election year. Indeed, masaccio has found the task force taking credit for investigations having nothing to do with securitization abuses. So the slow-walking of investigations should really come as no surprise: “task force” is what people in Washington create when they don’t want to do anything about a particular issue. Delaying the investigations also serves the purpose of allowing statutes of limitations to run out on various financial frauds.
But the CFS/New Bottom Line argument, made on a conference call today, is that the investigation is nearing a critical point, and the Justice Department specifically is blocking progress by denying resources. Most of the arguments come from this report from Richard Eskow of CAF, citing anonymous sources:
Confidential sources say that the President’s much-touted Mortgage Fraud Task Force is being starved for vital resources by the Holder Justice Department. Political insiders are fearful that this obstruction will threaten Democrats’ chances at the polls. Investigators and prosecutors from other agencies are expressing their frustration as the ever-rowing list of documented crimes by individual Wall Street bankers continues to be ignored [...]
A growing number of people are privately expressing concern at the Justice Department’s long-standing pattern of inactivity, obfuscation, and obstruction. Mr. Holder’s past as a highly-paid lawyer for a top Wall Street firm, Covington and Burling, is being discussed more openly among insiders. Covington & Burling was the law firm which devised the MERS shell corporation which has since been implicated in many cases of mortgage and foreclosure fraud.
Nobody we talked to wanted to publicly demean a public official’s reputation. Few of the people who are criticizing Holder privately want to fuel the right-wing witch hunt against him, which recently led to in the Republican House’s shamefully politicized contempt citation. But more of them expressed concerns about Holder, and expressed them strongly, than we expected [...]
One source familiar with the task force said that other Federal agencies were actively participating in the process, but that the Justice Department was preventing the group from getting even the relatively meager resources promised to it by the Justice Department.
While nobody provided precise numbers, several sources said the Task Force could show concrete results with twenty or thirty more staff members.Yet Holder’s Justice Department won’t make them available, said one source. By contrast, Republican officials allocated more than one thousand people to investigate the savings and loan scandal.
The objections are annoyingly vague, but I recognize in dealing with these matters that nobody wants to go on the record or get into much detail. This shift toward Holder, however, deserves scrutiny. There have been plenty of documented stories of reluctance toward investigation from Treasury and the SEC and HUD. This centers all the attention on DoJ, however. It’s not entirely credible that Holder is operating independently to slow-walk an investigation that has been slow-walked by virtually every official in the Obama Administration at one point or another. It feels as if Holder has become the “rotating villain” in this scheme, someone to deflect attention away from the whole policy framework to let the banks off for their crimes. Ultimately, the buck has to stop at the very top, with the President.
When pressed on this by me, everyone on the call insisted this was not the case. Brian Kettenring of CFS pointed to several protests his organization put on at Obama campaign fundraising events, and said that they would not ignore holding the President accountable. Tracy Van Slyke of NBL concurred. Richard Eskow insisted that his confidential sources all pointed to DoJ and DoJ alone as stopping progress on the working group. All involved said they would continue challenging the Administration as well as federal agencies to show proof that the investigation constitutes more than lip service. In particular, the New Bottom Line has tried to organize the 16 million underwater homeowners, many in swing states, as a constituency, to give the campaign an electoral bite.
It’s true that the resource allocation is pretty pitiful. Kettenring made the point that DoJ devoted 93 investigators to the failed Roger Clemens investigation for lying to Congress about taking steroids, but promised about the same amount to prove the biggest consumer financial fraud in American history. And according to Eskow, they aren’t even providing those meager resources, when they can be put to use.
But there’s a sense here where the train has already left the station. The working group was announced on January 27 and it took four months to name an executive director. The signs that nobody associated with this task force wants to really do the work are pretty obvious. And if we’re still talking about resource allocation this deep into the process, you have to suspect that the entire enterprise was a chimera from the start.
And ultimately, Eric Holder is not the sole actor responsible for that. In fact, by putting himself in a position to be denied resources, the leading individual in this mess outside of Washington, New York Attorney General Eric Schneiderman, deserves plenty of scrutiny. Kettenring said that he didn’t want to do any “post-game analysis” as he believed there was still a window to be effective and force the investigation forward. But he added that “everyone associated with this should know that their reputation is on the line.”