Without considering the guilt or innocence of the five major banks involved, the Obama Administration is poised to let Wall Street off the hook for foreclosures where as many as one million borrowers were "harmed" by robo-signing practices.
In a three-author article, the Wall Street Journal was abuzz over the impending settlement which will grant immunity for innumerable counts of robo-signing violations in exchange for loan "haircuts". Quoting HUD Secretary Shaun Donovan, the Journal glowingly describes the deal as the largest principal reduction of the crisis, promising a million borrowers a share of some $19 billion in relief on their loans:
"As part of the proposed settlement, Mr. Donovan said, a "number of families" who were harmed by foreclosure-processing mistakes would be directly compensated by banks."
The banks would also agree to reforms, as part of the practice of "deferred prosecution" that Obama has continued from the Bush era. Often left to secret back-room wrangling, the settlements between Wall Street giants and the SEC or DOJ have shown great tolerance for the reckless behavior that drove the US economy into the ditch.
With banks paying fines that represent tiny fractions of their annual profit totals, the settlements have been considered a nicely manageable cost of doing business. But with a preponderance of industry flacks winding up regulating their former firms, public outrage hit new highs this fall.
Finally, we saw NY District Court judge Jed Rakoff saying "enough!", infuriated that courts and federal agencies have simply stopped bothering to determine whether or not crimes were committed as they approved a profusion of immunity deals. As a result, Citigroup was denied a $285 million immunity settlement for alleged securities fraud and may have to prove their innocence at trial, risking a multitude of investor lawsuits should they lose.
NY Attorney General Eric Schneiderman has been leading the charge to hold banks accountable for their destruction. Since last August he has opposed Obama's proposal to grant immunity to Citigroup, Bank of America, JPMorgan Chase, Wells Fargo and Ally Financial for robo-signing, an unauthorized practice that had become such an open secret, it became an industry standard.
As it happens, four of the five banks involved in the settlement were clients of the DC law firm where both Attorney General Eric Holder and Lanny Breuer, the current head of the DOJ's criminal division, were partners. Reuters and Huffington Post also report here that Holder opposed investigations into robosigning despite evidence of massive volumes of forged or improperly notarized documents going back to 2010, the same year deputies under both Holder and Breuer went back through the revolving door to return to the same law firm.
Brokered by a 50-state panel of Attorneys General, the robosigning settlement talks ground to a halt when Schneiderman objected to the immunity provisions, seeking to preserve NY's rights to investigate and prosecute fraud, dissuading criminal or reckless activity, providing reparations and reducing the chances of future economic catastrophe. Schneiderman has been a lone voice seeking to restore the rule of law to an industry plagued by government-industry incest and pay-for-play at the highest levels.
For taking his job seriously, NY's Eric Schneiderman was booted from the panel, but was later joined by AGs from five other states, most of whom have filed related lawsuits: Kamala Harris (CA), Martha Coakley (MA), Catherine Cortez Masto (NV), Jack Conway (KY) and Beau Biden (DE).
These rogue AGs met January 10, to share notes with nine additional AGs said to be upset with the slow pace of the negotiations and the tin ear of the Obama administration. Attending were representatives from NH, HI, MO, MI, MD, MN, OR and MT. Biden's Deputy AG Ian McConnel suggested the "50 state" AG panel was not truly representing the concerns of all the Attorneys General being asked to sign off on the deal. Follow up meetings were also in the planning, according to HuffPo coverage.
It's possible we now hear about this impending settlement because the administration felt Schneiderman, Harris and the rogue AGs were leading a growing exodus and may turn the tide. The stepped-up timetable may be forcing dozens of AGs to hurriedly pick sides in a showdown.
AM radio reports in NYC today suggested New York might lose it's share of the pie because Schneiderman was not onboard and the WSJ spin is palpable, asking readers to believe we are lucky to get crumbs from the profit drenched banks.
From a law and order perspective, the settlement deal is much worse. The Obama administration clearly has favored banks from the outset - and surely seeks the corporate campaign donations that are expected to shatter records this fall.
But Schneiderman may be armed with new insights after agreeing to collaborate with Steve Linick, the Inspector General at the Federal Housing Finance Authority. Also "gone rogue" Linick has had the audacity to investigate banks after the 2008 collapse in connection with their Fannie Mae and Freddie Mac dealings.
For New Yorkers concerned with this issue, we recommend you contact Schneiderman's office at http://ny.ag.gov and write President Obama who "is committed to creating the most open and accessible administration in American history".
See more on this article at OpedNews.com
Update: This consumer's guide to robosigning at nolo.com provides critical understanding of legal options for homeowners and banks as this crisis continues to untangle.