Glenn Greenwald called “the failure to prosecute Wall Street executives for the criminal behavior that precipitated the 2008 financial crisis” “one of the worst legacies of the Obama presidency so far.”
“Until this president stops calling Wall Street’s deleterious actions ‘not illegal,’” Jeff Connaughton, Chief of Staff to former Senator Ted Kaufman said, “he’s failing to deter—and therefore effectively encouraging—future financial fraud. And until he gives a clear and full explanation of the inadequate response of his Justice Department and the S.E.C., he and his appointees are helping to undermine the public’s faith in equal justice under the law.”
William K. Black, who directed the government’s litigation during the savings and loan crisis, said “This is not some evil conspiracy of two guys sitting in a room saying we should let people create crony capitalism and steal with impunity. But their policies have created a criminogenic environment. There were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here.”
Okay, everyone agrees that fraud is hard to prove, and the transactions at issue were mind-numbingly complex. So why aren’t they prosecuting the easy cases at least?
According to an article in Reuters just last week entitled “The Watchdogs That Didn’t Bark,” foreclosure practices are “filled with potential leads” on criminal conduct.
Last month we learned that mortgage “servicers,” all affiliates of the biggest banks, may have foreclosed on the homes of 5,000 active duty service members in violation of the Servicemembers Civil Relief Act (“SCRA”). That’s according to an “independent” review of foreclosure practices directed by the Office of the Comptroller of the Currency in which the banks were allowed to pick the firms conducting the review. Yes, there’s been some criticism of the OCC reviews.
Lawyers representing service members think maybe letting the banks call their own fouls left a lot uncalled. They estimate that banks have foreclosed on the homes of as many as 30,000 service members in possible violation of the law.
The SCRA is not some obscure legal technicality that may have escaped the notice of the banks. The “servicers” are huge, specialized affiliates of the banks. Servicing mortgages is all they do, and they really don’t have that many laws to keep up with. The law tries to make sure that active-duty military personnel are not unfairly disadvantaged by their service. Deployed service members should receive actual notice of the foreclosure proceeding and have the opportunity to defend themselves, not just come home from Iraq or Afghanistan to learn that they lost their home while they were gone.
Violation of the SCRA can be punished by up to one year of imprisonment and a fine. In other words, it’s just a misdemeanor. U.S. Attorneys don’t usually prosecute misdemeanors…unless they want to make a point. It’s painfully obvious that the biggest banks just ignored the SCRA, assuming that they would never be prosecuted. And if they aren’t prosecuted, you can bet that they’ll continue to ignore the legal rights of military personnel and all the rest of us.
Violations of the SCRA aren’t especially hard to prove: The homeowner was an active-duty service member, and the bank foreclosed without following the procedures required by the law. So what if the bank didn’t know the homeowner was an active-duty service member? It’s up to the bank to find out, and it’s not at all hard. Most of the initial prosecutions would be of small fry, but some of them would decide they know something the prosecutor might want to know. That’s the way criminal prosecution works when the prosecutor’s heart is really in it.
So a couple of weeks ago, Walter Jones and I wrote Attorney General Eric Holder to urge that “possible violations of the SCRA be vigorously investigated and prosecuted.” And we urged that forgiveness for violations of the SCRA not just be thrown in as a “sweetener” in a broader settlement with banks over their foreclosure practices.
I know that it’s because of stands like this that I won Daily Kos’ endorsement, which I’m proud to have. But this stand will win me no friends on Wall Street, or with much of the Democratic establishment. I need some real people-power on my side.
Can you stand with me in this fight? Click here to chip in $3 to my campaign for this people-powered fight.