Lately we’ve been hearing some strong words from President Obama about Wall Street crime. But when the cameras and lights aren’t around, his administration’s been working feverishly to protect bankers from state law enforcement officials.
There are conscientious state attorneys general who believe the law applies to everyone. While they’re working to bring justice to Wall Street, White House officials are obstructing them by pushing a sweetheart deal with the banks that would end their investigations and prevent them from prosecuting crooked bankers.
If more people knew what was happening, the White House would be flooded with calls and emails demanding that it stop protecting Wall Street.
It’s still not too late for that.
The evidence for Wall Street’s criminality is overwhelming. The big banks have already signed consent decrees and other documents in response to well-documented charges of perjury and filing of false documents; illegal foreclosures; criminal solicitation through the repeated use of law firms and foreclosure servicers known to have violated the law; investor fraud; and other major crimes.
Wall Street’s lawbreaking crashed the economy, left millions of people jobless, and cost the world’s economy trillions of dollars in lost wealth. People have been illegally evicted, and millions were deceived into borrowing money for real estate whose value had been artificially inflated through illegal means, and who now owe that money to the same bankers who committed the crimes.
But none of the criminals have gone to jail—and they’re still collecting on those loans.
The responsibility for prosecuting crooked bankers belongs to both the Justice Department and the attorneys general who serve as their states’ chief law enforcement officers. AGs for all 50 states were brought together to negotiate with the banks over Wall Street mortgage fraud, and quickly came under intense pressure from the administration and corporate interests. Under the leadership of self-serving Iowa Attorney General Tom Miller, the group began to discuss a White House-backed deal that would protect criminal bankers from prosecution and let the banks settle for pennies on the dollar.
The first AG to reject the deal was New York’s Eric Schneiderman, whose jurisdiction includes Wall Street. Schneiderman had been pursuing criminal investigations and asked the group not to accept any agreement that would shut them down before all the evidence was in. He immediately came in for some heavy arm-twisting from Obama officials like HUD Secretary Shaun Donovan and top people at the Justice Department—the same Justice Department that has refused to prosecute a single banker for criminal fraud, and can only offer weak and implausible excuses for its failure to do so.
Ohio’s Miller immediately removed Schneiderman from the committee leading negotiations for the 50-member AG group, despite his state’s key role in prosecuting bank fraud. That move was either designed to remove Schneiderman from the room while negotiating with (and for) the banks, or it was Miller’s petty way of saying “you can’t sit with us in the school cafeteria anymore.” Maybe it was both.
Schneiderman nevertheless soldiered on, apparently undeterred by either the administration’s arm-twisting or Miller’s “you are so not hanging with us, dude” tactics.
Kentucky Attorney General Jack Conway soon stepped up and backed Schneiderman, saying “There should be absolutely no criminal or civil immunity given to banks for activity that has not yet been investigated.” Delaware’s Beau Biden also joined with Schneiderman, and that’s important. Many New York-based companies, including my ex-employer AIG, are legally incorporated in Delaware to take advantage of that state’s favorable corporate tax policies. (Biden’s also resisting the administration that his dad serves as vice president, which must make for interesting dinner table conversations at holiday time.)
Massachusetts AG Martha Coakley has sued five banks for allegedly seizing private property illegally. And the AGs of California and Nevada, Kamala Harris and Catherine Cortez Masto, have announced a joint investigation of the massive bank mortgage activity in their states.
These AGs are fighting corporate influence in order to uphold the law. They’re on the right side of this fight. Look who’s not.
For reasons known only to themselves, officials in the Obama administration have spent more than a year trying to undercut these AGs. They’re pushing a deal that would end their investigations before they’re even completed and would immunize bankers from criminal prosecution.
Like the Security and Exchange Commission’s notorious sweetheart deals, this Obama-backed settlement would let banks buy their way out of prosecution with a slap-on-the-wrist settlement of $20 billion-$25 billion. It would also create a phony refinancing program to make it look as if banks are doing something about the tragedies they’ve created by promising to refinance “as many as” 300,000 underwater mortgages (meaning the real number could be much smaller than that).
It’s one more get-out-of-jail-free card for criminals on Wall Street.
The social damage from this deal would be enormous. Consider:
- It reinforces criminal behavior: Once again crooked bankers would go unpunished. That would guarantee they’ll commit these kinds of crimes again and again, knowing they’ll never pay for it with their time or their money. Thanks to other soft deals like this one, big bank executives have already promised to stop their crimes (while “neither admitting nor denying wrongdoing”) — and then repeated them again and again, 51 times!
- The victims will pay for the crimes: Bankers defrauded their own investors by concealing their own true financial picture. The money paid in this settlement deal will be paid, not by the lawbreaking bankers who got rich off their own crimes, but by the very same shareholders they defrauded.
- It places the perps in charge of their own restitution: The refinancing program (for “as many as” 300,000 homeowners) will be run by the banks themselves. The last administration program designed to ‘help’ homeowners became a tool for banks to rip them off even more. Mortgage servicers misstated their figures in that program as much as 80 percent of the time. Bankers used it to extract more money from homeowners, then foreclosed on them anyway (often with false documents or inaccurate figures) while the Administration looked the other way.
- The settlement amount is a tiny fraction of the harm caused: There are 11.1 million underwater mortgages. Homeowners still owe the banks $750 billion for housing value that has evaporated. The banks artificially pumped out real estate values, these homeowners borrowed against the inflated prices, the housing market crashed—and they’re left holding the bag while bankers are holding their bonuses. And they still owe the banks all that money.
- It undermines the fabric of social trust: This deal reinforces the message that there’s one code of justice for the rich and powerful and another for everyone else. And that government works for the rich and powerful, while the rest of us are on our own.
We should be grateful for the courage and determination of these AGs. They need and deserve the public’s recognition and support. Voters need to tell the president that it’s wrong and unacceptable to push for a bank-friendly deal and undermine these public servants.
What’s your note to the White House going to say? Mine will go something like this:
Dear Mr. President:
That was one terrific speech you gave in Kansas the other day. It was great when you promised to make sure that “penalties count” for bankers. And you were absolutely right when you said that “Wall Street firms (keep) violating major anti-fraud laws because the penalties are too weak and there’s no price for being a repeat offender.”
If you believe that, why is your administration working so hard to protect bankers from state law? I admire Eric Schneiderman, Beau Biden, Jack Conway, Martha Coakley, Kamala Harris, and Catherine Cortez Masto. Why is your staff pressuring them to stop investigating these crimes and let bankers off the hook?
If you meant what you said, Mr. President, please tell your staff to back off and let these good people do the jobs they were elected to do.
Mr. President, you said in Kansas that “a strong middle class can only exist in an economy where everyone plays by the same rules, from Wall Street to Main Street.” So why is your administration trying to stop the states from enforcing those rules?
You were right when you said that “there is a deficit of trust between Main Street and Wall Street.” Please restore and protect the trust between those streets – and with Pennsylvania Avenue – by directing your administration to stop pushing this corrupt deal and support attorneys general Schneiderman, Biden, Conway, Coakley, Harris, and Masto.