By Abigail Caplovitz Field | February 28, 2012
Update: My original headline said “Sold Out” where it now says failed. I think it’s more accurate.
Dear State Attorneys General:
Rumor has it that this week we will learn precisely how you failed us all regarding the criminal enterprise that is mortgage servicing and foreclosure in America. That is, rumor has it that more than two weeks after you announced a deal with five bailed-out banks, we’ll all get to see the deal. Well, precisely speaking, we’ll all see the court filing containing the settlement.
Why the Secrecy?
Why aren’t you releasing the deal before filing it? I realize that you’re not officially rulemaking regulators who must seek public comment before finalizing rules. But much of your agreement functions like a regulator’s rule making. So why wouldn’t you, as a matter of good public policy practice, make the deal public for comment before seeking to finalize it with the judge?
Were you worried that insightful discussion of your crappy deal’s terms would end the deal’s perceived political utility? We critics can do that anyway, after it’s filed. Thing is, changing its politics is all we can do at that point. If given the chance earlier we could’ve forced you back to the bargaining table, which might have been productive. In fact, had you been talking to informed critics all along the way perhaps you would’ve cut a different deal to begin with.
By bypassing the public and going directly to the judicial validator, you’re pulling a Bank of New York and Bank of America. BoNY-BofA cut an outrageous deal to BofA’s huge advantage, at the expense of the investors that BoNY supposedly represents. To get that deal blessed they’re using a special state court procedure that has a real chance of working for them. That’s because it’s designed to bless Trustees’ actions without looking too closely at what they are, (and in this case) screwing investors. Similarly, you want the judge to bless your deal without the public looking too closely at it first, screwing the public.
AG Schneiderman, you know the case I’m talking about. You intervened in it because you said the deal was so lousy.
Don’t blame anyone else for your decisions.
Rumor also has it that some of you are feeling over-harshly judged. You fought the good fight; you worked very long hours; you didn’t get paid, and the banks’ attorneys did. You did great work, you say, because hey, these servicing standards are great. (Yes, well, they’re only as great as the enforcement is, and I’ve my doubts about that.)
I’ll give you this: the Feds worked against those of you interested in real justice for the American people. The f*cking Justice Department should have been pouring resources into investigations and indicting people all over the place. The Justice Department needed to go S&L on these guys, just ramped up for scale. I mean, we used 1,000 FBI and dozens of prosecutors to prosecute the much smaller Savings and Loan Fraud. Heck, we used 100 FBI on Enron. The warmed-over Financial Fraud Enforcement Task Force subcommittee (no it’s not new) has 55 investigators. No, President Obama, 55 investigators is not enough.
The SEC, OCC and Fed should’ve been on a law-enforcing and regulating rampage too. If you’d had Feds like those to work with, well, watch out. We might have cleaned house and put people back in the center of public policymaking, not banks and the bankers that run them.
Of course, if the Justice Department or the SEC were disposed to act that way then things would never have gotten this bad. And it wasn’t just federal law enforcement that let you down. Federal law makers did too, under both Republican and Democratic regimes. If Congress hadn’t done the industry’s bidding regarding derivatives, and hadn’t let banks become hedge funds, the crisis wouldn’t have happened. If the OCC, the FTC and the Fed had all been real regulators and enforcers, the crisis wouldn’t have happened.
So state AGs, I give you the slack you are entitled for being saddled with feds who don’t want to do a good deal. And I accept that some or even many of the AGs and their AAGs worked very hard. Are still working very hard. I’ll give credit for that too.
But I can’t give a pass for caving. The stakes are just too high, precisely because the Federal Government has chosen to stand with the banks instead of the people. The people of their States and our nation as a whole needed our AGs to tell the Feds to go f*ck themselves or their banker buddies.
We Need Leaders Who Will Fight For Us
There are times you just have to tough it out and do the right thing regardless of the personal cost. Our soldiers have faced that challenge for a decade, in the face of more trauma and stress than you’ll ever likely know, especially those of our veterans who have served multiple tours. We need soldier-level loyalty from our Attorneys General right now, because who else is there on the side of truth, justice, and the American Way? I mean, that’s as cheesy as can be, but it’s not hyperbole or metaphorical.
The people who orchestrated and facilitated the greatest white collar crime spree ever–a gold-collar crime spree–walk around certain that they will not only avoid jail, but that they can manage the situation to their advantage. They are so confident they are above the law, they don’t hesitate to manufacture evidence to ensure they win their litigation. You know this, because you understand that is what robosigning is all about.
We have a President who styles himself a defender of the 99%, particularly at election time, when his every key policy choice has favored the banks. This push the AGs to take a lousy but superficially pretty deal for the cameras, profoundly weakening them before the terms of the deal are finalized, is just par for the course. If you have any doubt about how power is being wielded, consider the treatment of second liens, and what a rejection of basic commercial and contract principles that it represents in the name of protecting the banks from the consequences of their insolvency.
Think about enforceablity, about how the banks get to manage the info flow–er “report” on their compliance–even though the crimes of at issue are forgery and fraud. Of all people, you know those are crimes of “moral turpitude” which can be used to impeach a witness‘s credibility. They systematically produced evidence for impeachment and you’re letting them testify on their own compliance when they have every incentive to say no problems exist, while maintaining the status quo?
Think about the banks’ insincerity: analysts predict foreclosures will increase in the near term. How can they increase if the banks are complying with the terms of the settlement? Not only would some foreclosures get modified instead, but some or even many would be unprosecutable because of securitization fail. Moreover, all the document processing systems in place have to be totally overhauled. We’re talking about a radical realignment of resources, serious hiring and training. That can’t happen fast enough for one of the first consequences of a deal to increase and speed foreclosures.
If the AGs don’t stand up to the Feds and the banks and refuse to take a bad deal, where is the public supposed to find our champion(s)?
I know the mantra is just wait, the good stuff comes next. But what set of facts can we point to that lets us rely on that statement in good faith? Hope and faith aren’t enough. You can’t prove securities fraud if all you can show is that you had hope and faith that the facially absurd statement was true. And given law enforcement in recent years, including this mortgage deal, the idea that something much bigger, much better is around the corner is facially absurd.
I’ll say this: journalists and organizers can and must do a better job of fully informing the electorate, empowering everyone to speak with a coherent voice on these issues. But the AGs’ commitment and loyalty can’t be contingent on grass roots action. I know the FDR quote. But I also know our soldiers don’t say, Hey, you want me to do the right thing? Go ahead and make me do it. Why should we have to make you do the right thing? The analogy between you and soldiers may not be apt, but it’s a lot more apt than you as Presidents.
At least that’s how I see it. And I want to say: Based on the public record, not inside intel (I don’t have any) I think Biden would’ve held out if even one other state had stood with him.
Abigail Caplovitz Field