There’s been a lot of confusion over the last few days about a possible deal with US banks to settle a fifty-state lawsuit over widespread and massive foreclosure fraud. Attorneys general from all the states have been working together, and the latest word is that the Obama Administration has proposed its own framework for a agreement.
Will that agreement be a fair one for the American people? The signs don’t look good. Not that it should be a surprise. Weak and misleading reporting has set the stage for a lousy deal – one that could let bankers off the hook for criminal behavior and even let them to keep their ill-gotten gains.
Time for a quick review of the facts: The banks’ mortgage fraud cost the economy many billions of dollars – trillions, if you include their speculation on housing values – and has left millions of homeowners in severe financial distress. This fraud was deliberate, widespread, and systematic, expedited by a program called “MERS” – a combined database and shadow corporation – designed to evade property law,. To date there have been no criminal prosecutions of bank executives for hiring teams of people who knowingly falsified documents and committed perjury on a widespread scale.
It shouldn’t be necessary to repeat those facts, since they’re so widely documented. But apparently it is necessary, since we’re still seeing misleading headlines like this one in last Friday’s Los Angeles Times: “Government, banks wrestle over how to settle case over botched foreclosure paperwork.”
“Botched foreclosure paperwork”?? There’s evidence – overwhelming evidence – that banks hired unqualified people and order them to falsely claim that they possessed property documents they didn’t have. “Botched paperwork”? We’re talking about a massive crime wave, not a couple of folders that weren’t filed alphabetically.
The problem extends to the body of the article too, which uses phrases like “faulty robo-signed documents.” Faulty? Robo-signed documents are a form of mass-produced perjury. Each one is a false statement to a court of law. Calling them “faulty” is like calling the money in the back of John Dillinger’s getaway car “misallocated.” It’s like calling the Bonnano crime family’s protection racket an “unjust form of taxation.”
With journalism like this, it’s no wonder that things are playing out as they are, with a Bloomberg News reporting that “the government originally floated a $25 billion penalty, which banks rejected.”
“Which banks rejected“? Since when do accused lawbreakers get to accept or reject the terms of their punishment and restitution? Apparently the Administration has been operating under the misapprehension reflected in this sentence from Business Insider: “To get a far-reaching settlement, the White House needs to get the approval of federal regulators, state attorneys general, and of course, the lenders themselves.”
Actually they don’t need approval from “the lenders themselves.” Here’s another approach: Have FBI teams descend on every bank headquarters in the country. Subpoena every single email ever sent or received by Jamie Dimon, Brian Moynihan, and all the other bank CEOs to see what they did and didn’t know about the illegal activity taking place in their organizations. Or hit them with massive fines and let them settle for a smaller amount. Apparently these approaches haven’t been considered.
Instead the Wall Street Journal told us that “The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns.” (“Mortgage servicing breakdowns“? I’m out of metaphors for the crimes that journalists persist in describing as errors – from now on you’ll have to make up your own.) The Journal reported that the Administration wanted banks to set aside $20 billion to reduce the loan balances on underwater mortgages, or else be fined the same amount.
The Journal report described its sources only as “people familiar with the matter.” People? Who are famiiar with the matter? They don’t even say which part of the “matter” these “people are familiar with. They didn’t just grant these sources anonymity – they obscured all details of their existence. Were they regulators? Administration officials? Bankers? Robot emissaries from the future sent to to find the mother of some future Wall Street prosecutor? We don’t know, and that makes it impossible to decode the possible motivations for this story. (The Society of Professional Journalists has published excellent guidelines regarding sources an anonymity, which include: “Identify sources whenever feasible. The public is entitled to as much information as possible on sources’ reliability Always question sources’ motives before granting anonymity.”)
Within 24 hours of the Wall Street Journal story about the settlement, the Huffington Post’s Zach Carter was reporting that there never was a deal, and that the $20 billion settlement number used in that report came from … well, nowhere. Adding to the confusion, the original Wall Street Journal story said that the Administration had a “proposal” for a deal, and not an actual deal.
We can assume that the $20 billion proposed figure is accurate, given the number of stories that have used it without a public denial. As far as the details are concerned, however, we’re now officially becalmed in fog-shrouded waters somewhere between Plausible Denial, Absolute Confusion, and WTF, with no idea which way the currents are drifting. As the outlines of the Administration’s proposal begin to coalesce (our response to it will is coming shortly),the media’s failure to educate the public has left the public unable to judge it fairly.
When it comes to Wall Street, first the politicians failed. Then the regulators failed. Then the ratings agencies failed. Now apparently it’s the media’s turn. American journalism has really let us down this time …
… according to people familiar with the matter.