Eric Schneiderman: Foreclosure Settlement “Down Payment”

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Given that we’re talking about some relief for homeowners who are so far underwater that they’ve completely lost the value of the down payment they paid on their homes, I thought NY Attorney General Eric Schneiderman’s use of the phrase “down payment” to be a curious way to describe that he considers this settlement just the first step toward achieving justice.

Down payments don’t have the kind of value they used to have.

Perhaps the most interesting thing Schneiderman said other than that, though, was he thought they’d get some relief from MERS through legal means, and therefore wouldn’t need any legislation about MERS. Does that mean he thinks he can shut down MERS with his suit? Let’s hope so. That would go a long way to fix the problems in our mortgage system.

Other than that, he offered little explanation of my two main questions about this: 1) how he expects to get to the underlying problems with mortgages–the securitization problems–without using the robosigning efforts as a way to work up a chain to a real prosecution and 2) how letting banks off the hook for fraud and forgery doesn’t encourage more of the same?

In his press conference–and at more length in an interview with Greg Sargent–he said we skeptics should believe that Obama (now) takes this seriously because of assurances he gave Schneiderman and the emphasis he gave it at the SOTU.

Asked if progressives should be skeptical of the administration’s assurances, given the lack of accountability so far, Schneiderman insisted that Obama’s private and public assurances have left him convinced he is serious about a real accounting.

“He took ownership of this,” Schneiderman. “Sometimes people on the left have to take yes for an answer. The President is accepting the challenge. It’s time for progressives to say, `okay, he’s moving with us now, he’s using resources of government to aggressively pursue the malefactors of great wealth, as Teddy Roosevelt put it.’”

Perhaps most interestingly, Schneiderman said that the coalition of liberal, progressive and labor organizations that had come together to insist that the current settlement not let the banks off the hook would help force the task force to ultimately succeed.

“This will ultimately depend on the coalition that’s assembled around these principles,” Schneiderman said. “We’ve now got a progressive coalition that … can move public officials to take a more aggressive approach.”

I do have some faith Scheiderman will succeed in doing some real investigation. But when I read this description of Obama’s commitment, I couldn’t help but think of Elizabeth Warren. Sure, she got a CFPB set up. But when it came time to using a recess appointment to put her in charge of it, well, that never happened.

Also, to trust Obama on this? He’s the same guy who promised accountability on illegal wiretapping and changes to FISA Amendments Act.

I still trust Schneiderman will get some investigation here, but I’ve learned from experience that Obama may renege on his promises to progressives for accountability.

Bank Bailout Day, February 9, 2012

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I may or may not have more to say about this.

But I’m thinking of declaring this Bank Bailout Day, a holiday of the stature of President’s day.

Forty-nine states, every one but Oklahoma, as well as federal regulators, will participate in a foreclosure fraud settlement that will release the five biggest banks (Wells Fargo, Citi, Ally/GMAC, JPMorgan Chase and Bank of America) and their mortgage servicing units from liability for robo-signing and other forms of servicer abuse, in exchange for $25 billion in funding for legal aid, refinancing, short sales, restitution for wrongful foreclosures and principal reduction for underwater borrowers. The announcement will be made on Thursday.

[click through for the details]

And then there’s the settlement price: $25 billion, divided up several ways. $3 billion will go toward refinancing for current borrowers who are underwater on their loans, as well as short sales. $5 billion will go as a hard cash penalty to the states, which can use them for legal aid services, foreclosure mitigation programs, and ongoing fraud investigations in other areas (one official close to the talks feared that much of that hard cash payout will go in some Republican states toward filling their budget holes). The federal government will get a cash penalty as well. Out of that $5 billion, up to 750,000 borrowers wrongfully foreclosed upon will get a $1,800-$2,000 check if they sign up for it, the equivalent of saying to them “sorry we stole your home, here’s two months rent.”

If you read DDay’s full post (or if you’ve read anything here), it’s clear that the amount of fraud was astronomical: 60% failures in one case. And if you’ve read that far, you know this is a bail out, every much as the billions gifted to banks in September 2008 was a bailout.

The Administration wants to call this a settlement.

Santorum to “Plant His Flag” in Michigan

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I think there are two reasons that Rick Santorum is enjoying another surge in the GOP Primary Reality Show, having won all three caucus states last night, two in a blow-out.

First and foremost, Santorum is the only one of the GOP candidates to be able to somewhat credibly claim to be what Nixon (as best described by Rick Perlstein) an Orthogonian–the outsider who resents the arrogance of the elite.

Nixon’s insights into the possibilities of harnessing voter resentment, Perlstein maintains, derived from his own; indeed, he was a “serial collector of resentments.” As a student at Whittier College, a young Nixon addressed his own painful exclusion from the school’s social elites, the Franklins, by forming his own club of outsiders, the Orthogonians, open to “the strivers, those not to the manner born.” For Perlstein, the Franklin-Orthogonian divide captures perfectly a split between social and economic elites and everyone else (at least among whites) that Nixon manipulated to his advantage.

His signal achievement was in successfully casting his Democratic opponents as Franklins and enlisting many non-elites into the Orthogonian ranks. He thus seeded the ground for the culture wars that sprouted during the 1960s and persisted, in varying forms, ever since. For the white suburban middle class, admiring Nixon involved “seeing through the pretensions of the cosmopolitan liberals who claimed to know so much better than you . . . what was best for your country.” As a presidential candidate in 1968, he gave them a name: “the ‘silent center,’ ” those ” ‘millions . . . who do not demonstrate, who do not picket or protest loudly’ ” and who “lived virtuously.” Within a few years, he fastened on the term that would endure: the Silent Majority.

In last night’s victory speech Santorum took on Obama, repeating over and over that Obama thinks he “knows better” than Santorum’s supporters. He said Obama doesn’t listen. And while that’s not much different from the nastiness and victimization that Newt performed to win the South Carolina primary, coming from a “grandiose” college professor it just sounds off. And Mitt and his Cayman Island tax shelters?

If you ignore Santorum’s self-dealing on PACs and his stint as a lobbyist, you can almost believe that Santorum has faced the same challenges as many Americans.

This year’s Republican voters–the relatively few who are turning out to vote–hate the knowing technocracy Obama is giving them, and Santorum can play on their resentment of that in a way Mitt and Newt can’t.

But Santorum’s wins have, also, been focused (with the exception of Colorado) on Midwestern states. One reason for that, I believe, is his explicit call for manufacturing, pushing to eliminate taxes on manufacturing in this country. Whether or not you believe he would do that, he speaks to the many benefits of manufacturing in a way that resonates in the Midwest. (Nate Silver predicted Santorum’s strength in the Midwest last week.)

And so Rick Santorum has–predictably, in my opinion–announced he plans to focus on MI rather than AZ for the next GOP primary day, February 28 (suck it, bmaz!).

But with the next major contests for the GOP nomination in Arizon and Michigan on Feb. 28, Santorum said on msnbc’s “Morning Joe” Wednesday morning that, “We think Michigan’s a great place for us to plant our flag.”

Read more →

Short Sale at the White House?

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I haven’t had much time to cover the ins and outs of the foreclosure settlement, which has been genuinely imminent for two weeks, but which is faltering now on banks’ refusal to be sued for anything. My guess is that Eric Schneiderman’s indefinite delay of his presumed announcement that he was joining the settlement last night means he had demonstrated the banks weren’t serious about how narrow they claimed the release to be.

That said, I found this to be a rather interesting article. It confirms what was obvious when they held a meeting in Chicago a few weeks back: this settlement is now the White House’s baby.

The White House has quietly injected itself into ongoing settlement discussions aimed at resolving regulators’ allegations that leading US banks abused struggling homeowners, underscoring the deal’s potential impact on the broader housing market and the presidential election.

Aides to President Barack Obama have in recent weeks courted civil rights groups and borrower advocacy organisations, scheduling meetings and calls in an attempt to gain support for the expected settlement and muffle criticism from key political allies.

Now, one of the aides named in the story is Jon Carson, director of the White House’s office of public engagement. It makes sense that he’d be the one to reach out to groups like NAACP and La Raza, as the story describes (It sounds like NAACP is much more willing to buy this sell than La Raza).

I also find it interesting that they’re reaching out though civil rights groups. That’s because–at least according to the way-too-optimistic release terms posted by Mike Lux–civil rights claims are at the top of the list of abuses not immunized with this settlement.

No release on any fair housing, fair lending, or civil rights claims.

Also, predatory subprime lending has been one of the few abuses actually investigated and, in a few cases, settled (albeit with inadequate payouts).

In addition to Carson, National Economic Council Chair Gene Sperling is the other White House aide named in the article. Granted, he had a big role in the auto bailout, so he has not limited himself to bank issues, but I found it notable in any case.

But here’s one question I’ve got about this article. It says that Sperling and Carson are sharing the terms of the deal.

In addition to sharing confidential details of the settlement terms, the White House has sought to alleviate advocates’ concerns that the liability release is too broad by detailing which legal claims would remain if a settlement were reached.

Really? These confidential details can be shared? Well then, why aren’t they being shared?

That Obama is sharing the purported details of the deal with certain groups is all the more alarming given that the AGs who have been working on this deal for over a year appear to have no idea of what the terms actually are.

In short, it’s not so much that I’m surprised the White House is running this show. It’s that this stinks to high hell of another asymmetrical info op, the kind they pull on national security all the time. By compartmenting information, they ensure people buy off on stuff they have a badly incomplete understanding of.

Look, if NGOs can have access to this information, than so can everyone, from taxpayers to the Attorneys General trying to hold banks accountable.

Chrysler’s Halftime Lesson: Government Investment for America’s Rebound

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[youtube]pGMOhOYvcw4[/youtube]

Once again, Chrysler had one of the best ads in yesterday’s Super Bowl, once again using the aesthetic of Detroit disaster porn to offer gritty inspiration. And while it’s not as good as the Eminem version last year, it might appeal to Chrysler’s target market even more, as it generalizes the uncertainty so many people feel.

I was struck by an irony at the core of the ad, though. Eminem really does embody Detroit. Clint Eastwood, in contrast, has no such personal tie to the city. And while his gritty voice works great for the ad. His delivery of, “This country can’t be knocked out with one punch” perfectly caught his performed toughness (it reminded me of his Million Dollar Baby, which I loved).

The one other reason to choose Eastwood for this ad, it seems to me, is the role he played as Walt Kowalski in his Gran Torino. That guy, an old Korean war vet struggling with the increasing diversity of his lifetime neighborhood, did embody Detroit, as much as Eminem does.

Yet, as written, Kowalski was not a lifetime Detroiter. Rather, screenwriter Nick Schenk based him on a bunch of veterans he met while working in a liquor store in his native Twin Cities. (h/t Wizardkitten)

“And in all of those jobs, especially in the liquor store, I would meet a lot of guys who were vets,” he said.

Schenk recalls asking customers with military tattoos about where and when they served.

“Little by little, as they came in every day for their bottle of ‘medicine,’ they’d tell you a little bit more,” he said.

“If you were respectful — I think everyone wants to get stuff off their chest, and they’re not going to tell their wives, they’re not going to tell their kids — and so if they can find an outlet to dump it out off on, that was me. I had a lot of guys telling me stories for years,” he said.

Those experiences helped him shape the character of Walt Kowalski, a Korean War veteran played by Clint Eastwood.

And the Hmong community was based on the Twin Cities’ sizable Hmong community.

Gran Torino, that tale of troubled old America coming into conflict with, and learning to love, the future of America, was shot in Detroit rather than the Twin Cities because of government intervention. The film was shot during the period when film credits offered under Jennifer Granholm and cut under Rick Snyder brought lots of new, creative jobs to MI; it was one of the first big films to be shot using the credits. Walt Kowalski was a native Detroiter only because MI invested in making him one.

And so Clint Eastwood, that Bay Area native who told a story about the Twin Cities but set it in Detroit, generalized the Detroit-specific ad about resilience from last year. But both the invocation of the Chrysler bailout and the use of Eastwood remind that rebounds work best when governments invest.

One more detail: this story–as told by Chrysler–leaves out a key part of the story. As John Nichols reported this morning, Chrysler specifically edited unions out of this story.

At the fifty-second point in the ad, images from last year’s mass pro-union protests in Madison, Wisconsin, were featured.

But something was missing: union signs.

The images from Madison appear to have been taken from a historic video by Matt Wisniewski, a Madison photographer whose chronicling of the protests drew international attention and praise. Wisniewski’s work went viral, and was even featured in a video by rocker Tom Morello.

Wisniewski’s original video, from an evening rally at the King Street entrance to the Wisconsin Capitol, features images (at the two-minute, seventeen-second mark) of signs raised by members of Madison Teachers Inc. (MTI), the local education union that played a pivotal role in the protests. One sign features the MTI logo, another reads: “Care About Educators Like They Care for Your Child.”

In the Chrysler ad, the MTI logo is missing and the “Care About Educators…” sign is replaced with one featuring an image of an alarm clock. Several other union signs are simply whited out.

It’s an incomplete picture, because government support is not enough to bring on America’s second half. But it is a key part of it.

Update: Karl Rove hates it. Always a good sign, in my book.

Mitt Cozying Up to Foreclosure Mill that Got McCain in Trouble

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Back in 2008, John McCain’s campaign shacked up with one of MI’s two notorious foreclosure mills, Trott & Trott. That housing situation became rather uncomfortable after the Macomb County GOP Chair asserted, in an on-the-record interview, that Republicans planned to use foreclosure lists to conduct vote-caging.

The chairman of the Republican Party in Macomb County, Michigan, a key swing county in a key swing state, is planning to use a list of foreclosed homes to block people from voting in the upcoming election as part of the state GOP’s effort to challenge some voters on Election Day.

“We will have a list of foreclosed homes and will make sure people aren’t voting from those addresses,” party chairman James Carabelli told Michigan Messenger in a telephone interview earlier this week. He said the local party wanted to make sure that proper electoral procedures were followed.

A couple of weeks after the Democrats sued to prevent the practice, McCain packed up in a hurry and abandoned the state–a state he had won in the 2000 primary.

Apparently, Mitt has the same poor taste in friends as McCain does. Trott & Trott is dumping significant money into Mitt’s SuperPAC and campaign.

A Farmington Hills law firm that represents mortgage giants Fannie Mae and Freddie Mac in foreclosure and eviction cases has contributed $200,000 to a super PAC supporting Republican Mitt Romney for president.

That super PAC, Restore Our Future, has run ads against Romney’s GOP rival Newt Gingrich, attacking his ties to Freddie Mac and accusing him of “cashing in” on the foreclosure crisis.

The Dec. 27 contribution, disclosed Tuesday in a Federal Election Commission filing, was written from the corporate account of Trott & Trott PC. A 2010 Supreme Court decision allows corporations and unions to spend unlimited amounts on independent campaigns to support or oppose federal candidates.

Managing partner David Trott is a member of Romney’s Michigan finance committee. He and his wife also contributed $7,500 to the Romney campaign, and his employees contributed more than $11,000 to Romney.

You’d think Republicans would have learned their lesson in 2008. In one of the states hardest hit by the foreclosure crisis, the support of foreclosure mills like Trott & Trott only  serves to make it clear where Republican loyalties lie–and it’s not with the homeowners hurt by the financial crisis.

Never Put Money within Reach of Jamie Dimon

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I actually don’t think Federal Reserve Bank of NY Board Member Jamie Dimon got his hands on the almost $3 billion of Iraqi money deposited in the FBRNY that has vanished.

An audit by [Special Inspector General for Iraq Reconstruction Stuart] Bowen’s office published on Sunday investigated the roughly $3 billion the Iraqi government gave the Defense Department to pay bills for contracts the Coalition Provisional Authority awarded before it dissolved in 2004. Most of these funds were deposited into an account at the Federal Reserve Bank of New York.  Even though DOD was responsible for maintaining the proper documentation, it could only account for $1 billion of the money.

“It’s symptomatic of the poor record keeping that was rife throughout the early stages of the reconstruction effort,” Bowen, who has conducted three other major audits into the original pot of roughly $21 billion in Iraqi funds the U.S. managed in 2003 and 2004, said.

After all, that money dates to 2004 and Dimon’s service on the FBRNY Board didn’t begin until January 2007. (Though I will note that Jamie Dimon and Iraq’s money overlapped at the FBRNY for a year.) Moreover, it was DOD’s responsibility to keep track of the money, not the FBRNY or Jamie DImon.

Still, I can’t help but notice that the announcement that we’ve lost almost $3 billion of Iraqi’s money (on top of the more than $100 million in cash that managed to walk out of Saddam’s former palace) came within a day of the time some are declaring the missing MF Global $1.2 billion has “vaporized.”

Nearly three months after MF Global Holdings Ltd. collapsed, officials hunting for an estimated $1.2 billion in missing customer money increasingly believe that much of it might never be recovered, according to people familiar with the investigation.

As the sprawling probe that includes regulators, criminal and congressional investigators, and court-appointed trustees grinds on, the findings so far suggest that a “significant amount” of the money could have “vaporized” as a result of chaotic trading at MF Global during the week before the company’s Oct. 31 bankruptcy filing, said a person close to the investigation.

That money does seem to have been lost in the immediate vicinity of Dimon’s JP Morgan.

As the week progressed, MF Global executives came to believe that JPMorgan Chase & Co., one of MF Global’s primary bankers and a middleman moving that cash, was dragging its feet in forwarding the funds.

Corzine phoned Barry Zubrow, then JPMorgan’s chief risk officer, to question the slow payments. Corzine also called William Dudley, president of the Federal Reserve Bank of New York, to update him on MF Global’s status and told him that payments were slow to arrive from JPMorgan and others.

[snip]

JPMorgan was able to slow the delivery of funds, worsening MF Global’s distress. As a result, they note, hundreds of millions of dollars of MF Global money may be still stuck in accounts at JPMorgan.

So while I’m not suggesting Jamie Dimon bears any personal liability for these missing billions (or those of Lehman or Bear Stearns), I will note that Dimon seems to have the 21st Century equivalent of the Midas Touch: Rather than turning things into gold when he touches them, when billions get within reach of Jamie Dimon, they seem to vaporize.

Poof!

Jamie Dimon, Toddler MOTU

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Can you think of any major public figure–or even any ill-tempered toddler in your own life–that whines more than Jamie Dimon?

Chief Executive Jamie Dimon said President Barack Obama’s decision to expand investigations into home lending and sales of mortgage securities could stop settlement talks with the states over foreclosure practices.

“It has a pretty good chance of derailing it,” Dimon said in a televised interview with CNBC from Davos, Switzerland on Thursday.

Whining Dimon is effectively warning Obama that if any real investigation takes place, JP Morgan will walk away from Obama’s effort to make pension funds pay to bail Dimon’s company out. And–as Michael Whitney noted on Twitter–he’s doing so from the safe harbor of Davos, where presumably his fellow-MOTUs won’t throttle him for such arrogance.

It’s not enough, I guess, that Obama wants to excuse JPMC for its crimes. Dimon will only accept such help, he says, so long as Obama also refrains from even peeking at what crimes JPMC committed.

What Do You Call a “Cornhusker Kickback” for California?

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Remember the “Cornhusker Kickback“? That was the $45 million in expanded Medicaid funding Ben Nelson demanded from the Obama Administration before he’d support Health Insurance Reform. The special treatment for Nebraska gave the reform effort a tawdry feel.

And just as importantly, it did nothing to improve Nelson’s popularity in his own state. When he announced he would not run for reelection in December, reporters pointed to the Cornhusker Kickback as one issue that was making his reelection increasingly unlikely.

Nelson obtained a huge controversial provision in that legislation — derisively called the “Cornhusker Kickback” by GOP opponents — that called for the federal government to pay Nebraska’s costs for Medicaid expansion, potentially saving the state tens of millions of dollars annually. The provision was ultimately killed, but Nelson still paid a political price. Nelson adamantly denied that he traded his support for the Democratic health plan in exchange for the special provision, yet his standing back home took a big hit. Nelson proved to be the 60th and deciding vote for the Democratic health-care package.

Yet it seems like Obama’s trying something similar in his effort to get CA’s Kamala Harris to join in his foreclosure settlement, with $10 billion in aid slated for CA’s struggling homeowners.

Banks and government negotiators have cleared a big hurdle in efforts to resolve allegations of widespread mortgage-related misdeeds, agreeing on terms for a settlement that are being circulated to the 50 US states for approval, state officials and a bank representative say.

The proposed pact would potentially reduce mortgage balances and monthly payments by more than $25bn for distressed US homeowners, these five people said.

The tentative agreement still must be approved by all 50 state attorneys-general, and negotiators have previously missed proposed deadlines. Participants described the proposal terms as set, meaning the states will be asked either to agree to them or decline to participate.

The amount of potential aid is contingent on state participation and would decrease significantly if big states do not sign the agreement. New York and California are among several states that have voiced concerns about the terms of the proposed deal with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. New York and California are particularly concerned with the part of the deal that would absolve the banks of civil liability for allegedly illegal mortgage-related conduct.

California borrowers would be eligible to receive more than $10bn in aid if the state were to agree to the terms, according to several people involved in the talks.

Don’t get me wrong. In this case, there’s good reason to give CA a disproportionate part of the settlement funds. Read more →

Obama’s Housing Campaign

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Let’s connect a few data points.

Last Friday, Jame Dimon demanded that all the players (except the actual homeowners) get locked into a room until some leader solved the housing problem he and his buddies created.

On Sunday, the Administration promised, for what seems the bajillioninth time, to really do something about foreclosures.

On Monday, the Democrats confirmed that Obama will accept his nomination at Bank of America stadium. They did this to have more skyboxes they could sell to the 1%.

Then on Wednesday, Shawn Donovan rolled out the latest incarnation of the foreclosure settlement–one which still helps just a small fraction of families suffering because the housing bubble crashed.

And now the Administration has a meeting planned for January 23–what sounds like just the meeting DImon demanded–to iron out the last bits of such a minimally helpful settlement. There are two details of this meeting that are especially noteworthy.

First, only the Democratic Attorneys General appear to be invited.

Materials about the proposed deal are being sent to all states, and Democratic attorneys general have been asked to meet on Jan. 23 with Miller, Donovan and Associate Attorney General Thomas Perrelli, said Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller.

[snip]

Republican attorneys general will separately discuss the proposed settlement by phone the same day with their Republican counterparts on the negotiating committee in addition to Donovan and Perrelli, Greenwood said.

[my emphasis]

Even better? This meeting is in Chicago!

At the Jan. 23 meeting in Chicago, the federal and state officials will answer questions and discuss details of the potential deal in an effort to win support, Greenwood said.

None of the named principles of this discussion live in Chicago. Thomas Perelli is in DC. Shawn Donovan is in DC. Tom Miller is in IA. Even the banksters are from NY and Charlotte.

The one thing that’s in Chicago, of course, is Obama’s campaign headquarters. (Outgoing Chief of Staff and now campaign Co-Chair and former–future?–JP Morgan exec Bill Daley? He lives in Chicago!)

So to “solve” the foreclosure problem, we’re going to invite a bunch of people–but only the Democrats–to Obama’s campaign headquarter city to hammer out something that really only helps a fraction of those affected.

Yes we can.