The struggles around a potential settlement with the bankers over crimes they committed have been fascinating. Beyond the immediate settlement talks on robo-signing, the bigger saga about whether Wall Street will be held accountable, and whether the housing market recovers any time soon, is going to take as long to resolve itself as President Obama is in office — although the short-term resolution will have a lot to do with whether that is for one more year or five.
The immediate debate is on the settlement — state attorneys general have been instructed that they need to decide by Monday whether to sign on it. The issues remain exactly the same today as it has been throughout the time the settlement talks have been going. Administration officials arguing for a settlement say that on robo-signing alone that it would be a long laborious process to prosecute all these claims, that not that many attorneys general would do aggressive prosecution, and that even if prosecutors won all the potential cases, the amount of money that would be awarded wouldn't be all that much more than what the settlement is calling for. They argue that the money from the settlement would not only write down a lot of underwater mortgages but would provide money for desperately needed legal services that would help lots of hard pressed people who have been screwed by bankers. Those attorneys general who have been reluctant to sign on, and progressive activists like me who have been against a settlement, have been concerned that no investigations are being done to determine the full extent of the crimes committed, and that any legal release would be drawn far too broadly allowing the big banks to once again get off without being held accountable for their crimes.
I have always been of the view that there are two supremely important things in this whole fight over the settlement. The first is a much more comprehensive and aggressive investigation of the biggest banks, one that, done right, would result in indictments of bank executives for fraud, along with the possibility for a far bigger amount of money from the banks for mortgage writedowns. The second is the legal release issue, because if that release is broadly drawn, any investigations going further — whether they are federal or state — could be rendered moot before ever getting out the door. Beyond those two things are a whole set of relatively more modest but still significant issues in terms of how a settlement would be structured, including the actual amount of money involved.
On the first issue, the task force gives some hope, and the administration deserves credit for appointing it, but many issues remain including whether it will have the needed staffing resources, and whether the Department of Justice and Securities and Exchange Commission officials who have seemed reluctant in the past to support more aggressive investigation will support New York Attorney Genral Eric Schneiderman in his efforts to push strongly ahead. On the second issue, I remain hopeful the release will be narrow, but also have confidence that Schneiderman, California Attorney General Kamala Harris, Nevada Attorney General Catherine Cortez Masto, Delaware Attorney General Beau Biden, and perhaps some other important attorneys general will refuse to sign on to a settlement with bad release language — and those are four incredibly important states not to be in a settlement. On the final set of issues, I have less confidence at the moment that I and other progressives will be happy with all or even most of the details, although I'm sure there will be a mix of good and bad. One bit of good news: according to Housing and Urban Development Secretary Shaun Donovan in a blogger call Saturday, it looks like there may end up being as much as $40 billion in mortgage writedown money involved in the settlement deal, as opposed to the $25 billion that had been reported previously.
There is one other factor on all this which is a great sign: Schneiderman's lawsuit filed against the big banks is a sign he is going to continue to be aggressive and independent in pursuit of justice on Wall Street. If, as I suspect, DOJ needs prodding, I think this kind of lawsuit is a good shot across the bow, as well as incredibly significant legal work in its own right. Here's a great report from Rachel Maddow Friday night about the lawsuit:
Side note before I go on: I am delighted to see Maddow doing such a good job of digging into this subject (in addition to this segment, she did a very knowledgeable interview with Schneiderman a few days ago). One of the key parts to the all-important task of holding the new task force accountable is good reporting from high-profile reporters like Rachel.
In addition to good reporters continuing to pay attention to what happens next with the task force, the broader progressive movement needs to be very focused on holding that task force accountable. I know there has been a lot of debate and division among progressives over how optimistic to be, with some arguing that the administration's history re investigating financial fraud and holding the big banks accountable in general has been very weak, that this new task force doesn't have enough resources assigned to it, and that some of the players in the task force have not been inclined to investigate Wall Street fraud in the last three years. Some of us have been more optimistic given Schneiderman's role and a sense that the political tides are shifting, although even a relative optimist like me is unhappy with the still relatively small amount of DOJ resources allocated and the continuing drip of rumors that key DOJ players want to slow this task force down. However we think on this, though, I think progressive optimists and pessimists need to be firmly united in one thing: we need to be singularly focused in the months to come on scrutinizing everything going on — and especially not going on — at the task force, and holding it absolutely accountable. Any report of a road block in the investigation, any information about a DOJ or SEC player holding things up, any inkling that Schneiderman is being held back, and I think we should raise holy hell. And if the weeks and months go by with few subpoenas and depositions, and with no or very few lawsuits or indictments of major financial industry players, we should be asking- with our outdoor voices, not our indoor voices- what the hell is going on.
Having said all that, let me close on an optimistic note. Healthy skepticism is a good activist's best asset, especially in this case with an opponent so powerful who has yet to be held accountable by anyone. And this administration has been a disappointment on too many banking industry related things. But political dynamics do actually change things, and effective political organizing and communications do too. Progressives won a strong, independent Consumer Financial Protection Bureau because we fought side by side with a great champion Elizabeth Warren to make it happen, and I hope and believe that in working with Eric Schneiderman and other progressive attorneys general we can do the same thing with this investigation. In the last few months, Obama did recess appointments of strong progressive nominees for CFPB and the National Labor Relations Board; he has gone from cutting deals with Republicans on the budget to fighting strongly for new jobs programs paid for by tax increases on the 1 percent; he has rejected the Keystone pipeline. On housing itself, he has announced a progressive new policy to develop new rental property, forced bankers to adhere to standards making it tougher to foreclose on unemployed people, and adapted a new homeowners' bill of rights that has the potential to be significant. And in the course of these settlement talks, progressives allied with Schneiderman and other progressive attorneys general have fundamentally changed the nature of the deal, with this new task force not even on the table a couple of months ago. If it turns out the release language in the settlement is narrow, and we get $40 billion in write-down money instead of the $15, $20, or $25 billion discussed a couple months back, that would also be the result of great organizing by progressives and a new responsiveness by this administration.
I'll say it again: a healthy skepticism is an activist's best asset, and we need to keep banging away to hold the administration accountable. But to ignore the fact that some important things are changing, and that hope is a real possibility, is to ignore our own success as organizers, and to ignore that the underlying political circumstances are shifting in our favor and that we should take advantage of that fact. President Obama is responding to us. We should keep the heat on, but we should also recognize that we are capable of winning some victories.