In addition, critics who have closely followed the efforts to get a mortgage settlement from financial institutions involved in abusive lending practices, including over-the-line foreclosure shenanigans, continue to believe that the deal will not be nearly tough enough. Some fear the assignment of New York Attorney General Eric Schneiderman to co-chair a new Department of Justice probe of the foreclosures scandal is an attempt to neuter one of the fiercest proponents of a tough settlement with the banks.
A big problem is that some elements of the initiative would require congressional action. That would be difficult any time on any issue given the current make-up of the House of Representatives. But chances for approval in an election year? Nil. That's not idle speculation:
“This is not a serious plan to help the nation’s housing market,” Rep. Spencer Bachus (R., Ala.), the chairman of the House Financial Services Committee, said in a statement. “This is just more of the same from an administration that offers expensive program after expensive program, none of which have worked to help struggling homeowners.”
House Speaker John Boehner (R., Ohio) told reporters that “none of these programs have worked … I don’t know why anyone would think that this next idea is going to work.”"One more time? One more time? How many times have we done this?" he asked reporters. "I don't know why anyone would think that this next idea is going to work."
Rep. Zoe Lofgren, chair of the California Democratic Congressional Delegation, and 28 other California Democrats in Congress—from blue dogs to leftists, signed onto a statement saying the president's proposals were "encouraging" but did not go far enough.
(Read more below the fold)
They expressed disappointment that Obama has not accepted their calls to replace Edward DeMarco, chief of the FHFA, an independent agency that regulates Fannie Mae and Freddie Mac. DeMarco, they said, has placed the interests of Fannie Mae and Freddie Mac "above those of struggling homeowners." They reiterated calls for a plan that includes interest relief and a pay down of the principal for under-water mortgages.
Time and again we've asked that the Administration take strong action on behalf of our constituents who have been victimized by mortgage servicers. Homeowners are following the banks' rules, and yet continue to be treated poorly. I hope that this Administration does not settle for the deal being pushed by the banks. Giving banks broad immunity would be settling—we must stand up for our constituents and demand more. Attorney General [Kamala] Harris's refusal to accept the initial terms is a good move for Californians and homeowners across the country."
Reuters reported Wednesday that it had seen documents on the final settlement that say a "monitoring committee" would be established and empowered to go to court to seek penalties of up to $5 million per violation of the terms of the settlement going forward.
Among longstanding critics, David Dayen remains skeptical about how effective this will all be:
[...] the initial measure of whether or not the banks are following the terms of the settlement will come from “internal quality control groups.” In other words, the foxes will guard the henhouse. The internal quality control groups will turn over quarterly reports (so abuses from January would theoretically not get discovered until April), and only at that point would the monitor be allowed to let a third party review the report if he finds improper implementation of them. But basically, this extends out the enforcement process by months and submits it to an initial gatekeeper run by the banks.
The fines of $1 million for the first violation and $5 million for a second could perhaps induce compliance, though I’m skeptical based on the process itself.
This presents another of those instances of "we'll see." On the White House blog Wednesday, Consumer Financial Protection Bureau Director Richard Cordray cut to the core: "Too many families were forced into foreclosure because paperwork was lost, phone calls went unanswered, errors were not resolved, or documents were falsified." Huzzah.
Not slip-ups or innocent mistakes or forgetfulness. Fraud. And fraud deserves prosecution and penalties that go beyond monetary settlements. But will we get any?
William K. Black, former bank regulator and chronicler of the savings and Loan scandal and its aftermath in the 1980s, is not convinced. Rather the opposite:
Neither [the Bush nor Obama] administration has prosecuted any elite CEO for the epidemic of mortgage fraud that drove the ongoing crisis. This contrasts with over 1,000 elite felony convictions arising from the S&L debacle. The ongoing crisis caused losses more than 70 times greater than the S&L debacle and the amount of elite fraud driving this crisis is also vastly greater than during the S&L debacle. Bank CEOs leading “accounting control frauds” now do so with impunity from the criminal laws. They become wealthy through fraud and even if they are sued civilly they almost invariably walk away wealthy with the proceeds of their frauds.
No settlement can make that right. Only prosecutions can. There are positive hints, but only hints, that we may finally get some. Let's hope we are not again disappointed on that score.