President Obama delivers the State of the Union address,
flanked by Vice President Joe Biden and House Speaker John Boehner
In last night's State of the Union, President Obama announced a mortgage crisis unit that includes federal and state officials to investigate wrongdoing by banks related to real estate lending. Sam Stein at Huffington Post got the early details
The office, part of a new Unit on Mortgage Origination and Securitization Abuses, will be chaired by Eric Schneiderman, the New York attorney general, according to a White House official. [...]
"The goal of this joint investigation will be threefold: to hold accountable any institutions that violated the law; to compensate victims and help provide relief for homeowners struggling from the collapse of the housing market, caused in part by this wrongdoing; and to help us finally turn the page on this destructive period in our nation’s history," reads a White House document outlining the objectives.
"This is a big achievement and something the entire progressive advocacy community wanted [with respect to] housing policy," added the White House official.
The unit will not supersede the efforts already underway by the Department of Justice. Instead, it will operate as part of the president's Financial Fraud Enforcement Task Force. In addition to Schneiderman, the unit will be co-chaired by Lanny Breuer, assistant attorney general at the Criminal Division of the Department of Justice, Robert Khuzami, director of enforcement at the SEC; John Walsh, a U.S. attorney in Colorado, and Tony West, assistant attorney general in the Civil Division at DOJ.
That last paragraph is where one of the rubs is: This investigation will run in parallel with—and not supersede—the existing and thus far toothless existing investigations. So it's unclear whether the new unit can go any farther than what DOJ has be willing (or unwilling) to do thus far, and whether this is another layer of bureaucracy that amounts to just so much window dressing. That's one of the worries of David Dayen, who's been covering this story comprehensively.
First of all, this becomes part of a three year-old Financial Fraud Task Force which has done approximately nothing on Wall Street accountability outside of a few insider trading arrests. So that’s the context of this investigative panel, part of the same entity that has spun its wheels. Second, the panel would only look at origination, where there have been plenty of lawsuits and where the main offenders are all out of business, and securitization, which may aid investors (that includes pension funds, of course) but not necessarily homeowners. Third, let’s look at the participants on this 5-member panel, which sounds to me like the absolute worst way to handle an investigation (you put an independent prosecutor in charge with a budget and subpoena authority if you really want to get something done, not a committee).
Another looming question is what this new unit means for the maybe, maybe-not imminent settlement between the banks and at least of handful of state attorneys general, the settlement that up until now Schneiderman has been strenuously opposed to. Felix Salmon suspects that this will push the settlement back, yet again, is likewise somewhat pessimistic on what this new unit could achieve: "So expect the status quo to continue, probably through 2012: banks with huge contingent legal liabilities hanging over their heads and their stock prices, and the government holding back on prosecutions as it attempts to cobble together a global settlement."
On the other hand, don't miss Mike Lux's post here at Daily Kos. Mike has been a forceful opponent of the proposed settlement, and critical of the administration for pushing this sweetheart deal for the banks on the states. Mike's truly encouraged, and optimistic.
Ultimately, victory can’t be declared until the banks actually move several hundred billion in mortgage writedowns, and some indictments are issued. But the task force announcement yesterday was a very big deal, one that progressives can and should be celebrating. We asked the administration for a bigger, broader, deeper investigation, and it looks very much like we got it. Now we have to keep doing that accountability thing, and make sure justice really is done.
We did ask for it, and this is a much better outcome than what many progressive groups thought was going to come out of the State of the Union—an announcement of a crappy settlement providing blanket immunity for the fraud of the banks and inadequate homeowner relief. This was certainly better. We'll know how much if and when some indictments get handed down.