Why Blame the Failure of the 50-State Settlement Solely on Tom Miller?

Yesterday, CA Attorney General Kamala Harris announced she was withdrawing from the 50-state foreclosure fraud settlement.

California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation’s biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.

Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation’s five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, a person familiar with the matter said.

The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street’s role in the mortgage meltdown, the person said.

With CA–the largest state and the one with the greatest foreclosure exposure–this effectively kills the settlement. See DDay for more on why Harris made this decision and what it means going forward.

But Harris’ letter announcing her decision makes something else (which had become increasingly obvious in recent weeks) clear.

Harris gives US Associate Attorney General Thomas Perrelli, not IA Attorney General Tom Miller, top billing on her letter.

This failure has become Perrelli’s baby as much as it is Miller’s.

When they held their last ditch attempt to save this meeting last week, they met in DC, not in IA or some other central location. And the settlement reportedly discussed at that meeting was heavily skewed towards giving the same people who fucked up HAMP another shot at trying to solve the housing situation.

About 80 per cent of the settlement figure, earmarked for the federal government, could be used to fund another round of debt and payment reductions for struggling US homeowners, people with knowledge of the Illinois document said. That would be split between principal reductions on first-lien mortgages and junior liens; payment forbearance for unemployed borrowers; and short sales, blight remediation and transition assistance for homeowners to move into rentals.

The remainder, about $4bn-$4.4bn in cash, could be designated for the states, which then would divide the proceeds to fund a variety of programmes, including assistance to borrowers. About half that amount could be used to pay up to $2,000 to an estimated 1.1m aggrieved borrowers who allege they were harmed by improper practices. [my emphasis]

So when Harris wrote…

California is hurting. We have the most homes and most home borrowers in default. During the period we have been negotiating, more than 560,000 additional homes in California have fallen into the foreclosure process. When we began this process 11 months ago, five of the ten cities hardest hit nationally by foreclosures were in California. Today, eight of those ten hardest-hit cities are here. And, recently, at the same time that we have been negotiating in good faith, foreclosures in California have surged again.

[snip]

Last week, I went to Washington, D.C. in hopes of moving our discussions forward. But it became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated. In return for this broad release of claims, the relief contemplated would allow far too few California homeowners to stay in their homes.

What she was saying, politely but nevertheless saying, is that giving a state like CA that has been devastated by foreclosures perhaps $500 million to deal with the aftermath, and in the process let the banks off the legal hook for abuses beyond just robo-signing just won’t fly.

The Obama Administration may have been offering Harris less than $1,000 per each new homeowner who has fallen into default (to say nothing of all the previous foreclosures), whereas in a state settlement, NV Attorney General Catherine Cortez Masto was able to get about $57,000 per affected homeowner in a Morgan Stanley settlement.

That tells you two things. First, the Obama Administration still doesn’t understand the extent of the damage the banksters they are trying to protect have done. They don’t understand the scale of the challenges facing states and towns and homeowners affected by the banks’ crimes. And second, the “Department of Justice” was ready to sign away justice for scraps with which to fund another ineffectual Treasury-run program without, first, having forced the banks to face the full consequences of what will happen if they don’t offer principal write-downs.

In other words, if you didn’t already know it, DOJ was (and presumably still is) actively looking for ways not just to ignore the banksters’ crimes, but to help them avoid the non-legal consequences of those crimes, too. Which sort of explains the vitriol directed at Eric Schneiderman of late. Two prosecutors, after all, can conduct a national investigation of the banksters’ crimes, DOJ, and the NY Attorney General. And by refusing to go along with the criminally stupid deal Perrelli was negotiating, Schneiderman has made it a lot harder for for DOJ to sponsor yet more injustice.

Marcy Wheeler is an independent journalist writing about national security and civil liberties. She writes as emptywheel at her eponymous blog, publishes at outlets including Vice, Motherboard, the Nation, the Atlantic, Al Jazeera, and appears frequently on television and radio. She is the author of Anatomy of Deceit, a primer on the CIA leak investigation, and liveblogged the Scooter Libby trial.

Marcy has a PhD from the University of Michigan, where she researched the “feuilleton,” a short conversational newspaper form that has proven important in times of heightened censorship. Before and after her time in academics, Marcy provided documentation consulting for corporations in the auto, tech, and energy industries. She lives with her spouse in Grand Rapids, MI.

20 replies
  1. MadDog says:

    The Beltway denizens who are pushing this unsettlement, whether they’re the Thomas Perrellis of the DOJ, the Turbotax Timmeh Geithners of the Treasury, or the Valerie Jarretts in the White House, all of them simply cannot sufficiently imagine the cruel desperation that afflicts US homeowners under the banksters’ gun.

    These Beltway denizens exhibit an empathy disconnect whose depth exceeds that of the Grand Canyon.

    The simple fact is the Perrellis, the Geithners, and the Jarretts all continue to have jobs! Sinecures from with which they easily pay their mortgages!

    No, don’t expect anything but crumbs from the like of the Perrellis, the Geithners, and the Jarretts.

    Or as another of the haves was purported to say to the have-nots: “Let them eat cake!”

  2. Nox Ninox says:

    the Obama Administration still doesn’t understand the extent of the damage the banksters they are trying to protect have done.

    The Administration understands perfectly well the damage the banks have done, and with former JP Morgan honcho Bill Daley as Chief of Staff, probably moreso than any of us do.

    Indeed, the very fact that the Administration understands the damage so well is the primary reason it has the DoJ working overtime to protect its bankster patrons from the fallout – at least until after it can rake in the $ billion in donations it believes it needs to win in 2012.

    I do not understand at this late date why so many still assume good faith on the part of the Obama Administration. This is not about incompetence or tone deafness, ew. This is a protection racket plain and simple.

  3. sojourner says:

    And the settlement reportedly discussed at that meeting was heavily skewed towards giving the same people who fucked up HAMP another shot at trying to solve the housing situation.

    A close friend has really fallen on hard times recently due to some health issues. I encouraged her to call Bank Of America (her lender), which has a website up offering all kinds of homeowner assistance. She spent (according to her) three hours on the phone getting transferred from one person to another before she even got to someone who knew what she was talking about. That person told her she could submit an application, but she would have to keep making her payments in the interim, and it could take up to six months before anything would happen. Otherwise, BoA could just go ahead and foreclose!!

    Personally, I think it is time to let TBTF fail… In the meantime, we need to know the full extent of the malfeasance.

  4. emptywheel says:

    @Nox Ninox: I’m arguing it’s a protection racket. But that doesn’t mean they know how much damage they’ve done.

    If they had, they would have known they were offering Harris a bum deal. They would have some sense of how utterly ridiculous this settlement offer was. They would have the awareness that gave them a reasonable negotiating stance.

  5. Nox Ninox says:

    If they had, they would have known they were offering Harris a bum deal.

    I’m sure AG Harris has made it quite clear to all of the parties at the table what she believes California’s monetary damages are, which makes it highly unlikely that a lack of accurate information is the reason for the bankster’s low ball offer.

    The bankster’s knew they were offering Harris a bum deal, but they’ve got no choice. To compensate all of the states for even a fraction of the real costs of their mortgage malfeasance would result in their bankruptcies the very minute the papers were signed. They know it. Harris knows it. And Obama knows it.

    Or, think about it this way. Let’s say you, ew, were given a full day in front of the President to give a detailed, multimedia presentation about all of the damages suffered, so that by the end of it Obama knew in stark detail just how devastating the mortgage crisis has been to so many Americans.

    Do you really think the Administration’s policy vis a vis the banks would change in the slightest?

  6. Saltinwound says:

    For some reason, Iowa has a disproportionate amount of power in this country. Their caucus means more in Presidential elections than the primaries of many larger States. California not only has bigger foreclosure problems than Iowa, it has more than ten times as many people. It would have been a dereliction of duty for Kamala Harris to continue to let Tom Miller handle this on behalf of California.

  7. emptywheel says:

    @Nox Ninox: Could I do it w/o Turbo-Tax Timmeh in the neighborhood, such that I could present how it would be a net benefit for the banksters? Could I tape it so what he said would become immediately public?

  8. rkilowatt says:

    Routing handling of recording of all mortgages, establishes the legal proof and track of ownership and claims on property, and comes with fees to counties/states, earned and justified over 150 years of standard practice. The monies fund county/state services.

    The non-legal practice of robosigning not only was subsidized by those stolen funds, which also funded the cash commissions to its principals…but robosigning enabled banker criminality.

    Robosigning was primarily designed to overwhelmingly wreck the standard handling of mortgages so that any later investigation, accountability, and correction by our justice system would be so nearly impossible that its perpetrators would not be at risk. That is clever-stroke gaming by by antisocial criminals. To wit: the evil intention and practice of financial flimflam and non-transparency, aka fraud.

    To wit: Any settlement via negotiation will bypass of actual justice and will satisfy criminal needs and wants.

  9. Nox Ninox says:

    Could I do it w/o Turbo-Tax Timmeh in the neighborhood

    Anybody you want. Just the President. The President and select staff… Daley… Holder… Michelle… Bo… You name it.

    Could I tape it so what he said would become immediately public?

    Sure. I think Obama would actually enjoy day of practicing his schtick about how badly the banks have treated their customers. Not like we won’t have heard any of it before though.

    What you really want on tape is the big yawn after lunch.

  10. rkilowatt says:

    Any push by Obama for a fast resolution of the robo-signing scandal is code for banker/lender bailout via omission of investigation and justice.

    Kudos to Kamala Harris and Gov. Brown for their political integrity.

  11. bmaz says:

    @rkilowatt:

    That is what has always bugged the crap out of me. It has been mass scale wholesale fraud to individual counties and their treasury coffers. There is just not much way to escape that. Yet of all the different actions and issues, that is one of the least discussed ones. I don’t get it.

  12. orionATL says:

    “That tells you two things. First, the Obama Administration still doesn’t understand the extent of the damage the banksters they are trying to protect have done. They don’t understand the scale of the challenges facing states and towns and homeowners affected by the banks’ crimes…”

    i don’t think there is a chance in hell they don’t know the scale of the damage.

    the only way they wouldn’t know is by remaining willfully ignorant which would be equivalent to acting incompetently.

    the obama admin does not want the banks to be financially stressed any more. they clearly fear a bank collapse entailing an immediate credit collapse if there are addtional real-life, market-place, “stress tests” applied to the banks.

    the admin is right to fear that as a possible outcome, but wrong to believe it is an inevitable outcome of banks being held legally and financially accountable. what is required of the admin, the regulators, and the banks
    is political and administrative imagination – rather than machinations.

    first, kill all the lawyers.

  13. readerOfTeaLeaves says:

    In other words, if you didn’t already know it, DOJ was (and presumably still is) actively looking for ways not just to ignore the banksters’ crimes, but to help them avoid the non-legal consequences of those crimes, too. Which sort of explains the vitriol directed at Eric Schneiderman of late

    Absolutely.
    And the banks seem to be threatening the gov’t with the reality that if they had to actually pay for the crap on their books, they’d go under in the blink of an eye, so ‘do y’all see this here Semtex vest I’m wearin’, bail my ass and make sure that I don’t have any litigation to deal with…’ remains operational at the federal level.

    Good to see a few of the states say, ‘Semtex, dudes? WTF were you asshats thinking? Richard Fuld got away with about half a billion, John Mack got away with a few hundred million, et cetera. If you’re gonna blow yourselves up, who are we to stop you?’

    In other words, the states still believe in something remotely like capitalism.

    The feds apparently believe in pixie dust and make-believe.
    Don’t think it’ll fly, but what the hell, they’ll all get regular benefits and paychecks to try and keep plates spinning in the air. Yawwwwn…

  14. readerOfTeaLeaves says:

    @bmaz: So do you mean that you don’t get why ‘fraud’ isn’t being openly discussed?

    Or is it the lack of attention to robosigning that you don’t understand? Because even 60 Minutes did a good segment on it, and Dylan Ratigan has knocked a few segments on the topic out of the ballpark. Robosigning is basically forgery by banks, so they can foreclose on your house.

    And McClatchy did an absolutely fantastic series about the implications of all this mortgage-related fraud for local governments and communities in CA. (Michael Lewis has a new piece on a similar vein in Vanity Fair, but I’ve not yet read it.)

    I think people find it hard to believe that such flagrant, predatory fraud was institutionalized. The bank branches still look the same; they function differently, but that is harder for people to get their heads around. There was no way for people to aggregate their individual, personal experiences and begin to see The Bigger Picture.

    And that mortgage fraud and leverage rules were institutionalized during the reign of GW Bush. But there’s a lot of dumb media, and also right-wing media (not always identical) that finds better ratings spewing vapid bullshit about whether the Gov of NJ will join the GOP Pres race than in aggregating data, or digging through old county land records.

    Because, face it bmaz — reporting on this stuff takes cajones, research skills, time, and resources.

    You’d have to pay journalists and researchers to go talk with county assessors, see what they do, then explain it all to the public.

    I’ve thought for some time that to really tell the mortgage fraud story well would probably be more like a Wikileaks project than like a conventional news article, in the sense that you need to aggregate data to tell the story.

    There are very, very powerful forces (local, regional, state, federal, public, private) who don’t want this story told. They want the focus entirely on ‘deadbeat buyers’. And I believe that Richard Fuld is still worth over $500,000,000…

  15. bmaz says:

    I was specifically addressing the fraud against county recorders and county treasuries as opposed to the general “fraud that is bandied about.

  16. readerOfTeaLeaves says:

    @bmaz: Ah. Really good point.

    I agree that it is ‘invisible’ to lots of people because few in the US really interact with county recorders, or have any clue about the money generated by county recording fees.

    But I think you point to a really big, important information gap.

  17. P J Evans says:

    @readerOfTeaLeaves:
    I was reading about the employees at Countrywide who reported corporate fraud to their bosses, and were promptly fired. They’re suing Countrywide/BofA because whistle-blowing is supposed to be protected by law.

  18. Jodie Reed says:

    We were invited to a private function there during October, the food and service were second to none!Not to mention the entertainment! Hope to be back there soon.

  19. dougR says:

    Folks, I notice that the document reproduced at the top of this thread contains Perrelli’s office address. Then I thought, Hmm, what a temptation to wrap up the basic thrust of this post in a nice little note, and send it to him, so he’ll know the country expects far better of him (and his department) than he’s delivering? (I think it’s called “accountability”)

    It may not amount to much more than a blip in the overall cast of things, maybe guys like him are programmed not to care about it, but I think when you’re offered a telephone that connects directly to a bad actor, you use it. Anyone with me?

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