Last week we emailed you to urge you to express your support for New York Attorney General Eric Schneiderman to hold banks accountable for foreclosure fraud and other abuses.
Over 5,000 of you sent emails, tweeted, and wrote on AG Schneiderman’s Facebook page encouraging him to investigate the banks, stand strong against pressure from financial institutions and Administration officials, and use his authority to hold lawbreakers accountable.
Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process.
This lawsuit doesn’t target some small players. Schneiderman is already tangling with the big boys:
The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as “MERS certifying officers,” have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.
What’s more? This is in addition to Schneiderman’s role as co-chair of the “financial crimes unit” that President Obama announced at the State of the Union. As Dave Dayen points out, the latter role is dealing with “pre-bubble” conduct, activities that lead to the 2008 economic crisis. This lawsuit is dealing with the “post-bubble” world, where banks allegedly took actions to stick it to homeowners just the sky was falling.
Schneiderman, along with fellow Justice Democrats Kamala Harris, Martha Coakley, Beau Biden, and Catherine Cortez Masto, is showing what public service is all about. Thanks for listening to us, Eric – as long as you’re holding banks accountable and fighting for homeowners, our members stand with you.
“Banks don’t need a slap on the wrist, they need a kick in the ass.”
Jim from Escanaba, Michigan, wasn’t mincing words when he wrote his message to Attorney General Bill Schuette. Jim was one of thousands of Working America members and union members who sent messages to their state attorneys general about the impending settlement with Big Banks on the issue of foreclosure fraud.
As Seth wrote yesterday, state Attorneys General will be deciding soon on a “50 state deal” that could let banks off the hook for their shady, deceptive, and possibly illegal foreclosure methods. Stories about tactics like “robo-signing” – where a bank employee signs thousands of documents and affidavits approving mortgage foreclosures without really looking at them – are widespread, but if the state AG’s take sign on to a proposed deal, none of these cases will be thoroughly investigated. Worse, the very people responsible could get legal immunity.
It would be one thing if the large financial institutions were truly doing their part to aid in the recovery of the economy they helped destroy. But what we’re seeing now, and throughout 2011, is that the wealthiest are having their own private recovery while the rest of the 99 Percent remain stuck in the mud. “Please stand up to these greedy banks and punish them as though it was one of us 99 Percenters,” wrote Doug from St. Clair Shores, Michigan, “Why did my house’s value decline by nearly 50 percent while their bonuses grew?”
As for homeowners, 7.5 million homes have entered the foreclosure process, and 11 million are at risk. The problems that started the mess in 2008 have not yet abated.
If your state Attorney General doesn’t call for an investigation, and instead takes the lazy, easy way out by taking a deal, the people responsible for our economy’s collapse will never be held accountable. There will be no reason for the robo-signers, fraudsters, and predatory lenders to change their ways. Stephanie from Greenwood Lake, New York, in her message to AG Eric Schniderman, says that she has seen these dirty tactics firsthand:
As a foreclosure prevention counselor at a local non-profit for the past 6 years, I know the devastating effects of the financial crisis; I see first-hand the irresponsible behavior of the big banks towards homeowners. There is clear evidence of misconduct, fraud and out-and-out crime perpetrated against the American people and no one is doing anything about it!
If any of us did our jobs the way the Big Banks did theirs, we’d not only get fired – we’d probably go to jail. “Ordinary Americans who commit a sliver of what high financiers did over the past half-decade would be lucky to see sunlight for the rest of existence,” wrote Jim from Gatlinburg, Tennessee to his AG Robert Cooper, Jr. Stephanie from Greenwood Lake, New York echoed those sentiments: “If I ever attempted to commit any of the acts the big banks perpetrated before, during and after the mortgage crisis, I would be in jail for a very long time.”
The central issue here is not revenge, but fairness. Many messages mentioned the fact that if you or I committed theft, or if a fellow American lost their home because of our negligence, we would be summarily punished. Unless we want history to repeat itself, we need a thorough investigation of these shady mortgage practices and put a stop to them.
We know that Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial aren’t above the law. The question is, do our state Attorneys General agree with us?
The knowledge that the economy is broken crosses political lines, and the wide majority of people who don’t pay much attention to political news nonetheless understand that something is deeply wrong. Where there’s disagreement is how we got here. Is the problem somehow due, as mainstream pundits, corporate lobbyists and right-wing politicians will tell you, to deficits, public employes and regulations? Or is it the decline of the middle class and corporate misbehavior at work?
At one of today’s panels at the Take Back the American Dream conference, the answer is clear: the failure of the economy to work for anyone but the financial sector gave us our current crisis.
“Banks are front and center in the story,” said economist Dean Baker, “but there’s also an incredible failure of regulation. Regulators were out to lunch as the biggest asset bubble in the world grew.” The housing bubble that drove the economy (through construction jobs and rising home values) ended up driving the economy into the ground when it collapsed. “We’re up against trillions in lost demand.”
The crisis was due to rapid deregulation and to the failure of regulators to enforce existing laws. Big banks wound bankrupt, Baker said, because they had so much garbage debt on their books.
Robert Kuttner of the American Prospect noted that the collapse was made possible by what he called a decades-long “invisible depression.” A postwar boom that built the American middle class suddenly reversed in the 70s, thanks to weakening of unions and government, so that gains of productivity growth stopped going to workers and were captured by a shrinking slice of the very richest. “I’ve written about the ‘declining middle,’ and that’s not an abstraction,” Kuttner said. “Middle class and working class people are working harder and not getting ahead, and they’re substituting debt for income growth.”
For Kuttner, the failure to hold big banks accountable and honestly deal with their insolvency and the failures of their executives was a huge mistake. “You guaranteed a wounded financial system years into the future,” he noted. Even after the banks demanded bailouts, they went back to back to business as usual.
“We’ve lost the concept that having a strong middle class also creates a strong and stable economy,” noted economist Heather Boushey. People in the political system forgot this, Boushey said, and noted that the lack of a strong middle class creates bubbles, as people go into debt to sustain their standard of living and keep up with costs. The decline of working people’s power becomes self-fulfilling, Boushey said. “A strong middle class creates better governance and better institutions. what’s going on in our economy affects what goes on in our democracy.”
“We have to be aware of what we’re up against,” she added, noting that when you have 40% of corporate profits from the financial sector, that has a big effect on who has power in Washington, DC.
America’s overall wealth continues to grow, Boushey said, but Middle America doesn’t share in it. The wealth is going to the very top while scarcity and tightening is the rule for the middle. Middle-class and working-class people work more hours, have less flexibility, and are forced to take on too much debt. We have 14 million people out of work, and the crash stripped trillions of dollars from housing value, so there’s just less money flowing through and thus fewer jobs.
The first task is to get working people engaged with the political process again, Kuttner said. “Until we get the political imbalance changed we’re not going to fix this.” He noted that the political imbalance is leading to bad policies. “You can’t deflate your way out of a depression. Austerity makes a depression worse.”
One consequence of this imbalance of power is accountability, Kuttner said. “More people have gone to jail for peaceful protest on wall street than went to jail for systematic fraud through the financial system.” The shady mortgage industry and the investment firms who financed them, regulators, ratings agencies, the writers of credit default swaps – not one of them was punished.
“In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks,” he said.
Who said that? Only the incoming chair of the House Financial Services Committee, Rep. Spencer Bachus (R-AL).
He plans to spend his time in charge of that committee serving the banks. How do you think that’s going to work out for the average bank customer?
CLEVELAND, Ohio — Michael and Pamella Negrea have never been late on a mortgage payment in the 15 years they’ve owned their home in Eastlake. But they’ve been foreclosed on three times.
Martin and Kirsten Davis, meanwhile, lost their home in Cleveland to foreclosure two years ago. The reason: a mess that started when they accidentally paid 14 cents too little on their monthly payment.
And Michael Rendes of Berea had his mortgage sold last year to Bank of America. The bank foreclosed on him in November, after insisting for months that it didn’t hold his loan and wouldn’t accept his payments.
Again, this is the kind of thing that’s going on while the banks and their allies are saying “well, you owe the money, so it doesn’t matter if our paperwork is fraudulent, we should be allowed to foreclose anyway.”
They’re not even bothering to confront this kind of thing, for the most part. They brush it off as “some mistakes have been made, but none that matter,” even as people are losing their homes that they have been paying for all along. And in brushing it off, they’re aggressively saying that the rule of law doesn’t and shouldn’t matter. This is how corrupt the American financial industry is.
Remember that next time the banks are pushing against being regulated by the government.
Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel A. Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”
Others are more sanguine about the dispute.
Joseph R. Mason, a finance professor who holds the Louisiana Bankers Association chair at Louisiana State University, said that concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.
“You borrowed money,” he said. “You are obligated to repay it.”
Ok. Yes, if you borrowed money, you are obligated to repay it. But at this point, is that really what we’re talking about?
In a complaint filed this month in Washington, D.C. federal court, Bank of America said the FDIC has wrongly denied claims by Ocala noteholders to recover from Colonial Bank and an Illinois lender also in receivership, Platinum Community Bank.
Bank of America accused executives at Taylor Bean, Colonial and Platinum of having fraudulently schemed to “double- and triple-pledge mortgages and steal assets” to hide their faltering conditions as the housing market declined.
So how widespread was this double-pledging of mortgages? How many people have homes that multiple entities think they are entitled to foreclose on? How screwed up is all the paperwork that nobody has any clue?
Also via Atrios, a consumer lawyer lays out the kind of bank practices that are apparently widespread:
First, Mr. and Mrs. Jackson did not face a foreclosure hearing after simply stopping payment – they paid the entire amount due per a statement sent to them by GMAC, and paid by certified check. GMAC mistakenly refused the check, alleging it was an NSF payment (not possible with certified funds), then placed the couple in foreclosure. I was simply trying to track the facts of the payment by deposing a witness who had sworn in court documents that she had reviewed the entire file and was familiar with the payment history, when, as it turned out, she was not only not familiar with the payment history, but the substance of her entire affidavit was false, including the allegation that the affidavit was sworn to in front of a notary. These were substantive questions I needed answers to – not an excuse for a delay. Further, the judge did not “throw out the case” – it is still pending, with GMAC still suing the Jacksons, years later.
I, and most of my fellow consumer attorneys who are members of the National Association of Consumer Advocates, do not raise these issues for delay – we raise them because we all have cases (this is the bulk of my foreclosure defense practice) where all or part of the foreclosure is purely the fault of the servicer or mill law firm – from homeowners whose payments were misrouted by the servicer, to servicers who simply changed the address of the property and then force-placed flood insurance, to servicers who ignore insurance plans the borrowers paid for (all examples from my cases) to servicers who refuse to even accept HAMP-type loan modification documents – all are substantive, real problems that were not the fault of the borrowers. The deposition was, in the Jackson case, merely an effort to get at the truth of the reversed payment – instead, GMAC admitted to wholesale manufacture of court documents, then promised to fix the practice, then continued that practice unabated for 4 more years.
How do you look at this and say “well, they borrowed the money. They have to repay it” as if it was just that simple? Are homeowners obligated to pay any bank that claims to hold their mortgage? Are they obligated to pay any charge that any bank has fabricated paperwork for? How many homeowners have to be wrongly foreclosed on before someone like Joseph R. Mason, holder of the Louisiana Bankers Association chair at Louisiana State University, concedes that perhaps it is a matter of some concern that working people are losing their homes because of fraudulent behavior by the banks?
The scope of illegality here is just staggering, and the Times gives a hint of how widespread it’s been—remember that quote about how the banks have “essentially sidestepped 400 years of property law in the United States”? Seriously not kidding there.
For years, lenders bringing foreclosure cases commonly did not have to demonstrate proof of ownership of the note. Consumer advocates and consumer lawyers have complained about the practice, to little avail.
But a decision in October 2007 by Judge Christopher A. Boyko of the Federal District Court in northern Ohio to toss out 14 foreclosure cases put lenders on notice. Judge Boyko ruled that the entities trying to seize properties had not proved that they actually owned the notes, and he blasted the banks for worrying “less about jurisdictional requirements and more about maximizing returns.”
He also said that lenders “seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance.” Now that their practices were “put to the test, their weak legal arguments compel the court to stop them at the gate,” the judge ruled.
Yes. That was a federal judge observing—apparently correctly, to this day—that banks had been getting away with foreclosing on homes they couldn’t prove they owned for so long that they had decided it was legal. And that’s the claim they’re still making today, despite all the recent revelations about robosigners and fraud.
In the waning days of the Bush administration, and before the implementation of restrictions on some executives’ pay, the highest paid bankers at 17 of the firms bailed out by the Bush Treasury’s Troubled Asset Relief Program (TARP) also got bonuses totaling $1.6 billion in the period from October 2008 to February 2009.
Kenneth Feinberg, the Obama administration’s special master on executive pay, issued a report today identifying the 17 banks, many of them among the nation’s largest, following an inquiry into compensation at all firms receiving TARP funds. The report does not include specifics on the amounts paid out at any of the banks.
At a news conference on Friday, Feinberg stressed that the firms did nothing illegal, but that their actions reflected “bad judgment” that was “contrary to the public interest.”
Later, President Obama, speaking briefly at the White House, said the review was meant to put firms on notice “that continued to pay out lavish bonuses” as they received government assistance.
The inquiry focused on the five month period during which banks received TARP money but were not yet subject to the new compensation oversight provisions. During those five months alone nearly 3 million American workers had their jobs taken from them by the Great Recession caused by Wall Street and the Bush administration’s failures.
Of the 17 banks identified, 6 have not yet repaid the TARP funds. NPRprovides a list:
Here are the 17 firms that Feinberg says made ill-advised payments. Those that have not yet fully repaid taxpayer bailouts are listed in bold:
* American Express
* AIG
* Bank of America
* Boston Private Financial Holdings
* Capital One
* CIT
* Citigroup
* JPMorgan Chase
* M&T Bank
* Morgan Stanley
* Regions Financial
* SunTrust Banks
* Bank of New York Mellon
* Goldman Sachs
* PNC Financial Services Group
* U.S. Bancorp
* Wells Fargo
Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn’t get aid, a USA TODAY/American University review found.
When the Bush administration’s Treasury Secretary Henry Paulson first demanded the TARP funds from Congress in late 2008, he said they would be used to buy the “troubled assets” on bank balance sheets. But that idea was rather fleeting, replaced quickly with the scheme of simply giving the funds principally to the biggest banks to shore up their capital needs.
Throwing money at the banks with no strings attached — virtually no compensation provisions and no requirements to generate lending — allowed Wall Street to survive, prosper and go right back to business as usual.
Without a robust revival of lending, especially to small- and mid-sized businesses, private sector job growth will continue to be inadequate by any measure. Meanwhile, the biggest Wall Street firms, having benefited from the Bush administration’s bailouts, are again generating mega-profits and mega-bonuses trading all manner of higher-risk instruments.
While the outlines of the Wall Street reform plan taking shape in the Senate are generally strong and sound, whether they will be enough to force a real change in the way the financial sector either helps or hinders Main Street remains to be seen.
That’s why it will be important to watch how the plan might be strengthened. Look in particular for possible amendments from Senators such as Sherrod Brown of Ohio and Ted Kaufman of Delaware that could limit the size and scope of banks. It is possible that Senator Byron Dorgan of North Dakota, who was the Senate’s most outspoken critic of the deregulation of Wall Street in 1999, may offer his own amendments to strengthen the regulatory system. Senator Maria Cantwell of Washington is also said to be considering a revived Glass-Steagall provision to once again separate commercial banks from securities trading and investment banking.
Those are just some of the things that will need to be done to make Wall Street reform potent enough to force at least a greater portion of the financial sector toward doing the job of aiding, instead of undermining, jobs and the economy.
Given the slow pace of financial service reforms, some states are looking for ways to avoid the “too big to fail” syndrome. One approach being looked at is state owned banking.
That’s a question that a growing number of candidates and legislators across the country are answering with proposals to create state-owned banks. Though these initiatives borrow from an old model–North Dakota has run a successful state bank since 1919–they are a response to a new reality: the hundreds of billions of public dollars plowed into big banks by the federal bailout have done little to free credit for job creation or economic development in recession-ravaged communities. So, taking a cue from Nobel Prize-winning economist Joseph Stiglitz and other critics of private-bank bailouts, latter-day populists are proposing to put public money to work for the public good.
During the early 1900′s, North Dakota’s economy was based on agriculture. Serious in-state problems prevented cohesive efforts in buying and selling crops and financing farm operations. Grain dealers outside the state suppressed grain prices; farm suppliers increased their prices; and interest rates on farm loans climbed.
By 1919, popular consensus wanted state ownership and control of marketing and credit agencies. Thus, the state legislature established Bank of North Dakota and the North Dakota Mill and Elevator Association.
Bank of North Dakota (BND) was charged with the mission of “promoting agriculture, commerce and industry” in North Dakota. It was never intended for BND to compete with or replace existing banks. Instead, Bank of North Dakota was created to partner with other financial institutions and assist them in meeting the needs of the citizens of North Dakota.
Meeting the needs of the citizens used to be what banks did. As small, locally owned banks were bought out by larger banks, that were bought by too-big-to-fail conglomerates, the quaint concept of meeting the needs of the citizens fell by the wayside.
Back to John Nichols and how some states are thinking about going back to meeting the needs of their citizens:
Oregon Democratic gubernatorial candidate Bill Bradbury is calling for the creation of a Bank of Oregon, which would keep money in the state and invest in sustainable development. “It is time to declare economic sovereignty from the multinational banks that are responsible for much of our current economic crisis,” says the former State Senate president and secretary of state. “Every year we ship over a billion dollars in Oregon taxpayer dollars to out-of-state and multinational banks in the form of deposits, only to see that money invested elsewhere. It’s time to put our money to work for Oregonians.”
Michigan’s Virg Bernero, a leading candidate for the Democratic nomination for governor in that hard-hit state, is another public-banking proponent. “We can break the credit crunch and beat Wall Street at their own game by keeping our money right here in Michigan and investing it to retool our economy and create jobs,” says the populist mayor of Lansing. In Illinois, Green Party gubernatorial nominee Rich Whitney, who won 10 percent of the statewide vote in 2006, proposes depositing all state tax revenues and pension contributions in a state bank. “Instead of using state funds as a means to further enrich private banks, a state-owned bank could earn additional revenue for the state while at the same time help spur economic development in Illinois,” he argues.
This is a populist solution whose time may well have arrived – especially if we want to avoid what the Austin Lounge Lizards foretell:
Working people have plenty to be angry with Wall Street about. A $700 billion bailout. Toxic assets and loan guarantees to the tune of hundreds of billions of dollars. A financial crisis and credit crunch. Billions of dollars in six- and seven-figure bonuses to the Wall Street executives who got us into this mess.
Unemployment reaching 10 percent. A mortgage crisis extending far beyond subprime loans. Abusive credit and debit card fees. More than five job-seekers for every one job.
Wall Street has treated Main Street as a giant ATM—gambling with the economy, then coming back with their hands out for help. But somehow, no matter how much help the banks need to survive, they always have the resources to fight proposals to regulate them or get them to pay their fair share.
That’s why Working America has launched the ”I am not your ATM” campaign. Already, people in Albuquerque, N.M.; Columbus, Ohio; Portland, Ore.; Ann Arbor, Mich.; Little Rock, Ark.; and Minneapolis have been photographed with “I am not your ATM” signs at major banks to let Wall Street know they’ve had enough. Wall Street’s biggest banks need to be held accountable, with a strong, independent Consumer Financial Protection Agency. Rather than asking taxpayers for more money, Big Banks need to start repaying us for the damage they’ve done.
In the coming week, we at Working America will hold more events in cities across the country, but you can participate online. Submit a photo to NotYourATM.com and send Wall Street the message that you’re done being Big Banks’ ATM. It’s time for them to clean up the mess they made, instead of expecting working people to do it for them.
