On Friday, a coalition of progressive groups
delivered a petition to the White House with more than 360,000 signatures calling for real investigations by the administration before a sweetheart settlement deal for the banks is released. Today, those organizations held a conference call with Sen. Sherrod Brown (D-OH) and Rep. Brad Miller (D-NC) to reinforce that message. They were joined by economist Simon Johnson.
The action by these groups is spurred on by reports that there will be an imminent announcement on the long-rumored settlement with banks on foreclosure fraud, spearheaded by the Obama administration and joined in by a number state attorneys general. President Obama is expected to announce something about the settlement in tomorrow's State of the Union address. Backing up that speculation is a meeting today between U.S. Housing and Urban Development Secretary Shaun Donovan and a Justice Department official and Democratic attorneys general "to rally support for a proposed settlement with banks over foreclosure practices." Likewise, a conference call today with Republican attorneys general has been rumored. As David Dayen notes, however, the attorneys general who matter the most, those who are opposed to this settlement as being too easy on the banks and not nearly large enough address the scope of the foreclosure crisis, aren't likely to attend.
Because of that ongoing opposition, and the likelihood that rather than a 50-state settlement, the administration would announce a settlement with 14 or 15 states, there's still plenty of room for action by the administration. And that action, Brown, Miller and Johnson argue, should be real investigation of the banks.
Rep. Miller laid out some of the key questions that still haven't been answered in any of the reported news about the settlement, questions that need to be answered by the administration and by the attorneys general who are agreeing to it, ranging from what actually has been investigated and how rigorous has ti been to what is actually being settled, and what claims by banks are being released. Critically, he wants to know where the $20 or $25 billion settlement number came from; when there's actually something along the order $700 billion in negative equity held by homeowners in the nation; and who's going to be paying for this. Will it be investors, which could include public pensions, or will it come out of the banks' assets? And which homeowners get relief?
Secretary Donovan has said that this would provide relief to some 1 million homeowners, but there are 10.7 million who are underwater, many of whom didn't buy more house than they could afford and acted responsibly, but because of unemployment or illness or the recession—through no fault of their own—are in danger of losing everything.
The problem for all of the people on the call is that this settlement not only leaves all of those questions hanging, it provides essentially blanket immunity for the banks, taking away any incentive for the banks to abide by the rule of law, and leaving the economy still hanging with that $700 billion in negative equity out there.
Then there's the politics. In an election year in which President Obama is expected to highlight the economy, jobs, and standing up for the middle class, letting the banks off the hook to this degree will severely undercut that message. All of the participants on the call argued that the economy, public policy, and politics all demand that this settlement doesn't go through until a rigorous investigation of the banks is completed. And they all see the State of the Union address as a great time to announce those investigations.