Short Sale at the White House?

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.

19 replies
  1. P J Evans says:

    They’re still pressuring Kamala Harris to sign on to the multi-state ‘settlement’, and she still doesn’t like that deal. Apparently people who like it haven’t bothered to actually look at it.

  2. MadDog says:

    The White House wouldn’t be pulling another “public option” deal here would they?

    As in “sharing confidential details of the settlement terms” that will appease their target support groups and then will magically never show up in the actual settlement?

  3. William Ockham says:

    I would translate the “sharing terms of the deal” to something like “floating trial balloons to see what passes muster with the professional left” and I’m sure they are hearing the same thing that Mike Lux reported.

    I’m actually encouraged by this. It means Obama’s team is getting smarter politically. And I believe that will make the proposed settlement better than it would have been if it had been negotiated without input from interest groups on the leftish side of the political spectrum. Assymmetrical info ops only work on the unwary. La Raza isn’t likely to be unwary on on this issue.

  4. emptywheel says:

    @William Ockham: I don’t think a deal is possible. I think what Schneiderman (and Masto) is doing is testing the lies he’s being told, and as he exposes them, then the banks are pushed to offer more. They’re not willing to do that right now.

  5. Bob Schacht says:

    Thanks for this update. However, I am still wondering about the difference between this deal (which has a long history, right?) and the lawsuit already filed by Schneiderman, and on the third hand the “new”(?) investigation that Schneiderman is supposed to be leading.

    My personal opinion of late is that
    (1) BAnks should not be able to foreclose unless they can prove that they have title. (IIRC presently the assumption is that banks do have title, and it’s up to the homeowner to challenge who is the title-holder.)
    (2) If a bank wants to foreclose but can’t prove it has title, then the cost to reclaim title should be that the principal is marked down to the market value of the house, and the loan refinanced at current rates.
    (3) Requirements for refinancing are way too tight. The pendulum has swung from practically no requirements at all before the crash, to extremely tight conditions such that most homeowners do not qualify to refinance. The real estate market is being strangled by this. Requirements should be more reasonable: financially adequate, but not over-restrictive.

    Of course the banks will squeal like stuck pigs at these conditions, and it would cost them a huge amount, but frankly they should have thought this through before engaging in massive fraud. For years they have been ignoring the squeals of crushed homeowners with under-water loans, so now they shouldn’t expect too much sympathy if we ignore their squeals.

    Geithner, of course, is overly worried about the “health” of our banking system, but what about the “health” of home ownership? Geithner is too close to the banks to be objective about this, and I’ll bet he’s pulling the reins on Obama by raising dire threats.

    Bob in AZ

  6. klynn says:

    Thanks for the update and for catching this EW.

    This timeline is incomplete and fails to tell the whole story. It needs to run from 1999 to today. Then, only then will we have a complete picture of this mess.

    The short sale started a while ago.

    Short selling the White House is a trend. But I know you know that.

  7. rosalind says:

    “By compartmenting information, they ensure people buy off on stuff they have a badly incomplete understanding of.”

    via TPM, Judge Emmet G. Sullivan in his order to release the full non-redacted independent report on prosecutorial misconduct during the federal investigation of Ted Stevens has this quote:

    “leaving the public with only the information from the trial and immediate post-trial proceedings,” Sullivan wrote, “would be the equivalent of giving a reader only every other chapter of a complicated book, distorting the story and making it impossible for the reader to put in context the information provided. The First Amendment, the public, and our system of justice demand more.”


  8. PeasantParty says:

    I’ve been following this closely. As a previous real estate paralegal all I can say is:

    Nevermind. You wouldn’t be able to read the astericks and other symbols.

    What I will say is this:

    They know that anyone that does press charges and tries to get claim for damages on this fraud will only be able to do so through mediation. They will not get a trial. I’m sure that everyone that reads here knows how mediation for large monied corporations go. How is an unemployed or under employed homeowner that has been defrauded supposed to get legal representation and restitution with that? Exactly! They won’t!

  9. bittersweet says:

    @Bob Schacht: I do not understand why there are ANY qualifications for refinancing. This, is the bullshit! Once again they are misdirecting with the wrong question. Homeowners already HAVE a loan. Why do they need to prove they have MORE money to change the terms? If anything, they should be proving they can NOT afford the higher rate, at the risk of default.
    Banks are just saying: We got you, so fuck off!
    The US government should be applying student loan criteria. If you make too much money, then you do NOT qualify!!!!!!

  10. bittersweet says:

    @bittersweet: And yeah, I get you banksters’ lying excuses. You are claiming that if I am not a “money pants”, then you need to make more profit off of me because I run a greater risk of default in the long run. Pay to play for us po folks.
    The lie is: I am already underwater. I probably lost my job. I may have already declared bankruptcy, so you can not go after me if I default. You should be begging me to pay my mortgage every month! You should be at my doorstep PLEADING with me to sign onto better loan terms so that I might pay you back!
    Instead, you say my credit is no good, so I get no interest rate reduction.
    The world has gone crazy. But you know that.

  11. klynn says:

    As though the TBTF’s credit is any better. The banks have been playing at the roulette table since 1999… The tax payers, seem to have representatives who like to negotiate better terms for the banks’ bad credit.

  12. rugger9 says:

    We have time on our side, and the fact that the so-called settlement is reported to be better than it was before [though I agree there is NO good reason to be sneaky here] tells me the longer the banksters wait the worse it will be for them. It’s an election year, and I can’t see this being able to be dragged out past November to be able to sneak back into the smoke-filled rooms again. The politics and voters wouldn’t permit it. For hotshot business types, Dimon and his ilk are pretty stupid as well as arrogant.

  13. bittersweet says:

    @PeasantParty: Thank you. But of course I get it. I am living it. As soon as my adjustable rate mortgage adjusts up, I am OUT OF HERE!
    FICO scores are the equivalent of strip searching Grandma at the airport. And we all feel just as violated. They do it to keep us in line.

  14. MaryCh says:

    Are the banks ok with civil rights-based suits because “that’s a small enough threat that we can allow it if it’s what POTUS needs to get the deal done”?

  15. prostratedragon says:

    @MaryCh: In sum, you’ve probably got it. Specifics:

    They are civil, not criminal.

    I imagine that the damage amounts are limited. (Right, anyone?)

    They go to dark people, which doesn’t hurt the optics on the whole mortgage crime that the banks want to leave people with, since all that some will see is that the damage payments go to dark people. (Tack that on to the end of the “Fannie/Freddie/CRA made the banks lend to negroes unqualified borrowers” meme for how this thing began and you have quite a brew a-bubbling.)

  16. earlofhuntingdon says:

    I presume a “settlement” that gives the banksters another get out of jail free card is a sine qua non for the banksters’ backing of Obama’s re-election (even if they give still more in donations to the GOP).

    A broad settlement would eviscerate the most threatening state and federal law claims of millions of former householders, thus saving the banksters hundreds of billions. Mr. Obama must think he can politically afford it because the banks won’t back him without it and the householders wronged by their crimes would get even less from the Mittster.

    Mr. Obama’s primary goal seems always to have been to save the banks the hundreds of billions they owe to homeowners because of their intentional, fraudulent, predatory conduct. It will save the jobs and companies of the CEO’s who will keep him in office and provide succor in his retirement. It’s the sort of deal that helped create the British and American empires. Rhodes in southern Africa and William Howard Taft’s administration as governor of the Philippines are good examples.

  17. prostratedragon says:

    @klynn: I think we’re looking at some kind of grand bargain that was struck back in the 80s in Congress, before retail banking became so nationalized by the shadow sector.

    Also I’m pretty sure that the things being protected, so far, by the maintenance of this bargain go well beyond the banks.

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