Month: August 2011

The assault on Eric Schneiderman continues

Last week I wrote about the smear campaign that’s revving up against New York Attorney General Eric Schneiderman. Now Schneiderman is facing intense pressure from the Obama administration to drop his objections to a bad settlement with Wall Street around the foreclosure crisis. Gretchen Morgenson reports:

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks.

Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.

But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation.

Not surprising, the large banks, which are eager to reach a settlement, have grown increasingly frustrated with Mr. Schneiderman. Bank officials recently discussed asking Mr. Donovan for help in changing the attorney general’s mind, according to a person briefed on those talks.

In an interview on Friday, Mr. Donovan defended his discussions with the attorney general, saying they were motivated by a desire to speed up help for troubled homeowners. But he said he had not spoken to bank officials or their representatives about trying to persuade Mr. Schneiderman to get on board with the deal. [Emphasis added]

The amount of stomach-turning, nausea-inducing  crap in this one passage is hard to handle. The Obama administration – through HUD and the DoJ – is pressuring New York’s top law enforcement official to stop doing his job. The banking industry asked the Obama administration for this pressure and the Obama administration has complied. Not only is the administration pressuring Schnedierman’s office, they’re pressuring consumer groups to pressure Schneiderman’s office on behalf of the bankers. And then Donovan is justifying it with the transparently false line that it’s, in fact, about “a desire to speed up help for troubled homeowners.”

The current figure being bandied about in the 50 state attorney general settlement talks with the banks is in the range of $20-25 billion. If Donovan and the Obama administration wanted to “speed up help for troubled homeowners” they could instantly unleash the approximately $40 billion the Federal government has sitting unused from the HAMP program and the Hardest Hit Fund. But they don’t want to speed help to troubled homeowners, as Atrios points out, because they’ve had years to do this and still haven’t done it.

The only rival to Donovan in terms of hair-pulling absurdity is Katheryn Wylde of the NY Federal Reserve board and Partnership for Charlotte New York City:

Characterizing her conversation with Mr. Schneiderman that day as “not unpleasant,” Ms. Wylde said in an interview on Thursday that she had told the attorney general “it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

Actually, Ms. Wylde, no, they’re not. Wall Street is Wall Street. Main Street is Main Street. And corporations are not people. Sadly it’s hard to imagine Shaun Donovan or anyone else driving this in the Obama administration disagreeing with Wylde.

Not shockingly, I’m not the online one writing online who’s furious about this reporting on the administration’s efforts to squash investigations into foreclosure fraud.

Yves Smith:

Yet rather than address real, serious problems, senior administration officials are instead devoting time and effort to orchestrating a faux grass roots campaign to con a state AG into thinking his supporters are deserting him because he has dared challenge the supremacy of the banks.

Marcy Wheeler:

You see, the Administration has an “immediate opportunity to help a huge number of borrowers stay in their homes,” without any action from Eric Schneiderman. They have a way to do so more swiftly, in such a way the servicers actually would be held accountable. It would involve offering refis with principal reductions to all the underwater homeowners whose loans are owned by Fannie and Freddie. That would not only help a huge number of borrowers stay in their home, but it would be massive stimulus.

But instead they’re sending Donovan to pressure Schneiderman to pursue a measure that would benefit far fewer homeowners and probably take more time, while putting the last nail in the coffin of the rule of law in this country.

Phillip Anderson:

Did you see what [Donovan] tried to do right there? It’s called lying. It’s complete and utter bullshit. The Obama administration’s desire for Schneiderman to, well, stop doing his job, isn’t to further the interests of distressed homeowners at all. It’s all about giving the banksters yet another “get out of jail free” card.
…
Eric Schneiderman was elected to do a job, an extremely important one, serving the public’s interest and he’s doing a mighty fine job of it so far. If anything, the enemies he’s making, as illustrated above, show just how well he’s performing in that position. At a time when our US Attorney General, the AGs of states around the country as well as the federal agencies like the SEC and other instituions that are supposed to be representing the public’s interest seem to be AWOL or simply indifferent to those interests, Schneiderman is one of the few public officials anywhere that seems to actually want to do anything to hold anyone, anyone at all, accountable.

I can’t really recall a single piece of news that made me as hopping mad as this piece by Morgenson did. It’s not that this was really news. I knew that the Obama administration and Wall Street banks would try to pressure Schneiderman and other AGs to not investigate foreclosure fraud. But the fact that the administration and its surrogates are so openly admitting that they don’t want their to be investigation is just stunning. It’s probably better, as David Dayen points out, that this is out in the open. It helps draw the battle lines with greater clarity.

On one side Eric Schneiderman and other AGs like Beau Biden, Catherine Mastos, and a few others are fighting for homeowners and the American public. On the other side, Shaun Donovan, Katheryn Wylde, and other Obama administration figures are fighting on behalf of huge Wall Street banks. Now that that’s clear, I suggest you do what Yves Smith and Phil Anderson suggested and thank Eric Schneiderman for his leadership:

If you are a New York resident, I hope you’ll call (800 771-7755 or 212 416-8000) or e-mail Schneiderman and thank him for standing up to the corruption of the banks and their enablers in the Administration. I think he will appreciate the show of support.

House progressives blast Obama

Originally posted at AMERICAblog.

The relationships between progressive House Democrats and the administration seems somewhat strained. Jim McGovern (MA-3):

“We need to get the focus back on jobs,” said McGovern. “Here we are at the end of August, and Congress hasn’t done anything about jobs.”McGovern voted “no” on the debt ceiling compromise, calling is “a catastrophe” that disagreed with both President Obama and the American people’s stance on revenues.

“I didn’t run for Congress to dismantle the New Deal,” said McGovern.

The Massachusetts Rep is a loyal supporter of the president, but feels that the current political climate in the country calls for bolder leadership.

Oregon Rep. Peter DeFazio (OR-4)is only slightly less pointed in his criticism of President Obama.

“I believe Oregon is very much in play. I mean we are one of the harder hit states in the union, particularly my part of the state. I’ve just done six town hall meetings, have seven to go but people are shaking their heads and saying ‘I don’t know if I’d vote for him again.’” Defazio said.Asked if he was surprised, the congressman shrugged.

“Not at all,” DeFazio said. “One guy asked me, ‘Give me 25 words what he’s about and what he’s done for me.’ I’m like, ‘It could have been worse.’”

Burn.

George W. Obama?

David Bromwich of TomDispatch has a long, thoughtful piece about the many disturbing places where the Obama administration has either directly continued or expanded upon policies with regard to war, surveillance, and government fealty to private corporations that were once considered unspeakably bad unto evil or unAmerican. While they policies have not improved with age under a Democratic President, it’s important that people pay attention to these things. What was outrageous eight or even three years ago is now unremarkable and accepted. This is a terrifying development and one which speaks to how truly damaging the Obama presidency has been.

The Bromwich piece is very long and worth a read, but I’ll highlight a passage that Glenn Greenwald has also highlighted:

The usual turn from unsatisfying wars abroad to happier domestic conditions, however, no longer seems tenable. In these August days, Americans are rubbing their eyes, still wondering what has befallen us with the president’s “debt deal” — a shifting of tectonic plates beneath the economy of a sort Dick Cheney might have dreamed of, but which Barack Obama and the House Republicans together brought to fruition. A redistribution of wealth and power more than three decades in the making has now been carved into the system and given the stamp of permanence. Only a Democratic president, and only one associated in the public mind (however wrongly) with the fortunes of the poor, could have accomplished such a reversal with such sickening completeness.

Greenwald responds:

Economic suffering and anxiety — and anger over it and the flamboyant prosperity of the elites who caused it — is only going to worsen. So, too, will the refusal of the Western citizenry to meekly accept their predicament. As that happens, who it is who controls the Internet and the flow of information and communications takes on greater importance. Those who are devoted to preserving the current system of prerogatives certainly know that, and that is what explains this obsession with expanding the Surveillance State and secrecy powers, maintaining control over the dissemination of information, and harshly punishing those who threaten it. That’s also why there are few conflicts, if there are any, of greater import than this one.

I think this is spot-on. There is a confluence of activism happening – from historically oppressed people or communities joining with young people and workers, all joining with and being aided by highly informed and capable technological activists like Anonymous and WikiLeaks. The continuity of policies from Bush to Obama has meant that things which could have gotten better are either staying the same or being made drastically worse. There’s no way to say that all of this is happening in a vacuum, with a sanguine and approving public. Instead, people are informed and they’re angry. What that means will be seen, but I certainly wouldn’t presume that the US will escape the sort of public protests that we’ve seen throughout Europe, especially if the administration, Congress, and the elites they serve continue to preserve or enhance Bush-era policies.

Dana Goldstein on “Class Warfare”

In The Nation, Dana Goldstein has a really great review of Steven Brill’s new book, Class Warfare: Inside the Fight to Fix America’s Schools. Brill has historically been a big supporter of Michelle Rhee and other education activists whose reforms always seem to center around busting teacher’s unions. Goldstein spends much of the review pointing out all of the hard evidence about the influence of outside factors like “family income, nutrition, health, English-language proficiency” that have a greater impact than the teacher they have in the classroom. Brill and people like Rhee tend to look at teachers as the sole factor in a child’s education and upbringing and have embraced a destructive frame of “teachers unions versus poor kids.”

While Goldstein does a good job fisking Brill’s arguments, she notices that as he spends more time evaluating problems beyond the “teachers unions versus poor kids,” he moves away from this polemical binary and accepts that the challenges to providing a good education to America’s children are deeper than Michelle Rhee has lead us all to believe. Goldstein writes:

Although Brill, by the end of Class Warfare, comes to recognize the limits of the education reform movement he so admires, he somehow maintains his commitment to the idea that teachers can completely overcome poverty. There’s a reason, I think, why this ideology is so attractive to many of the wealthy charter school founders and donors Brill profiles, from hedge funder Whitney Tilson to investment manager and banking heir Boykin Curry. If the United States could somehow guarantee poor people a fair shot at the American dream through shifting education policies alone, then perhaps we wouldn’t have to feel so damn bad about inequality—about low tax rates and loopholes that benefit the superrich and prevent us from expanding access to childcare and food stamps; about private primary and secondary schools that cost as much annually as an Ivy League college, and provide similar benefits; about moving to a different neighborhood, or to the suburbs, to avoid sending our children to school with kids who are not like them.The fact of the matter, though, is that inequality does matter. Our society’s decision to deny the poor essential social services reaches children not only in their day-to-day lives but in their brains. In the face of this reality, educators put up a valiant fight, and some succeed. The deck is stacked against them. [Emphasis added]

This is really great stuff from Goldstein, though it’s really just a savvy phenomenological bookend to an otherwise thorough review.

Taibbi: The SEC is covering up Wall St crime

Matt Taibbi of Rolling Stone has an explosive look at how the SEC has been routinely destroying evidence of financial crimes by Wall Street.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency’s records – “including case files relating to preliminary investigations” – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term “Orwellian,” devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or “Matters Under Inquiry” – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission’s internal website. “After you have closed a MUI that has not become an investigation,” the site advised staffers, “you should dispose of any documents obtained in connection with the MUI.”Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

The SEC hasn’t just done this a handful of times, Taibbi finds that over 18,000 separate MUIs were destroyed.

The Taibbi piece also provides an in-depth look at the revolving door between the SEC and top Wall Street banks and law firms. To make matters worse, the biggest participants in the revolving door come from the SEC’s Enforcement Division – the people whose day to day job is investigating Wall Street and stopping criminal behavior.

The whole story is absolutely a must-read. But here’s where this gets really important for the average American:

Forget about what might have been if the SEC had followed up in earnest on all of those lost MUIs. What if even a handful of them had turned into real cases? How many investors might have been saved from crushing losses if Lehman Brothers had been forced to reveal its shady accounting way back in 2002? Might the need for taxpayer bailouts have been lessened had fraud cases against Citigroup and Bank of America been pursued in 2005 and 2007? And would the U.S. government have doubled down on its bailout of AIG if it had known that some of the firm’s executives were suspected of insider trading in September 2008?

Taibbi points out that the answers to these questions are essentially unknowable. But there’s no doubt that the information that the SEC destroyed was important. Hell, there’s no doubt that the failure of a regulatory agency to actually investigate and conduct oversight of the industry it is tasked to oversee is a huge problem. The story of the financial collapse is largely a story of the ignorance of regulators, risk management officers and bank executives. Much of this ignorance was deliberate. Refusing to investigate complaints of bad behavior is a pretty clear example of how this willful ignorance was maintained.

Taibbi’s piece discusses how Senator Chuck Grassley’s office has attempted to get answers from the SEC about the destruction of MUIs. Not shockingly, the SEC has basically told him to bugger off. Hopefully a curmudgeon like Grassley will get pissed off enough about the SEC’s disrespect of his office to do something. Clearly there need to be meaningful congressional investigations into the SEC’s destruction of evidence in contravention to the law. In the mean time, I’d hope that Taibbi’s piece opens the eyes of administration officials to the massive problems at the SEC. This behavior cannot be allowed to continue if there’s any hope to rebuilding the US economy in a way that doesn’t put it at the perpetual mercy of banksters deciding to break the law to line their pockets.

Don’t Elevate Warren Buffett

Following his op-ed on Monday in the New York Times, which called for taxing the rich at an undisclosed higher rate than what we currently have, Warren Buffett was held out as a great hero – a traitor to his class and a rare American who actually believed we should tax rich people. While I agree with Buffett that we should tax the rich, there are a couple large and fundamental problems to liberals elevating Buffett’s arguments.

First, as I highlighted on Monday, Buffett is completely non-specific about what the higher tax rate for the wealthy should be. He suggests that there be tax brackets for people making over $1 million and another for people making over $10 million, but doesn’t say what those should be.  Specifics matter because a small hike won’t really do much at all. Instead, the hike should seek to achieve a particular social end. In this case, that goal should be reducing the political clout wealthy elites have through their wealth. If you question this, just ask yourself if you think the Koch Brothers or Rupert Murdoch should have less power in American politics. If you’re reading this blog, I’ll presume that your answer is yes and move along.

Second, and more importantly, in his op-ed, Buffett came out in favor not only of the austerity measures pushed by both Republicans and the White House, but called for the Super Congress to go beyond $1.5 trillion in spending cuts. This has been almost entirely ignored by people elevating Buffett’s op-ed. He wrote:

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here.

Coincidentally, the AP reported today that President Obama “will challenge the new “supercommittee” of Congress to go beyond its goal of $1.5 trillion in deficit reduction.” Apparently Buffett and Obama are working from the same playbook on this issue. Anyone following the austerity debate knows that spending cuts of this magnitude require major cuts to Social Security, Medicare and Medicaid to rich that mark.

Third, Buffett frames his call to tax the rich around the idea of shared sacrifice. At first blush, this seems like a pretty good idea, and again, it’s one that we’ve seen from President Obama in recent months. The problem with this is that tax rates which keep millionaires millionaires and multi-millionaires multi-millionaires don’t in any reasonable sense actually constitute sacrifice on the part of the rich. On the other hand, cutting Social Security dramatically reduces the amount of money tens of millions of Americans have to live on, mostly while they’re living on a fixed income. Cutting Medicaid and Medicare likewise require massive cost increases for seniors in nursing homes, again, many of whom can’t afford more cuts. Cutting unemployment benefits or aid to homeowners, well, you get the picture.

The zeitgeist should properly be defined by how much pain and suffering poor, working and middle class families have felt following Wall Street crashing the economy. People who’ve lost their homes, their jobs, their health insurance, and their basic economic security have already sacrificed. They’ve sacrificed far more than they could afford to sacrifice. And what about those lucky poor, working and middle class Americans who have not yet lost their homes, their jobs and their health insurance? Clearly now is not the time to take away their safety net.

Elites pushing for austerity are saying these people should give up even more, because suddenly the deficit is an existential threat to America. And Warren Buffett chimes in, “Well, me and my pals could kick an extra few bucks to the kiddie and it won’t hurt us.” Thanks, pal.

Here’s what would make sense: recognize that poor, working, and middle class Americans have already suffered enough. Recognize that wealthy elites not only caused the calamity everyone else is suffering under, but have yet to be asked to pay to clean it up. Then tax millionaires and multi-millionaires at, say, Reagan-era rates (which in 1986, for the top bracket, were 50%). Then don’t cut any more social spending, let alone the Big Three programs. I don’t know if that would produce equity, but frankly, shared sacrifice is not particularly appealing, especially when it’s a vehicle for destroying our social safety net.

Naturally what I’m describing is not politically possible. The Obama administration,  the Republican Party, and many Democrats in Congress believe that the poor, working, and middle classes of America should make more sacrifices in the form of cutting government spending and cutting the social safety net. There is near-unanimity on this across the aisle, which again is what makes Buffett’s shared sacrifice rhetoric so troubling. During the deficit debate, the Republicans wanted all spending cuts and no tax increases, while the Obama administration wanted about as many dollars of spending cut, while also having small revenue increases through things like taxes on corporate jets. This was a fig leaf. The differences were purely optical and remain so. The shared sacrifice rhetoric of Buffett, as with Obama, is simply a way to achieve austerity with some minor taxation of the rich. The rich may oppose this taxation, but as Buffett ably points out, it won’t change any of their behaviors, let alone their rich lifestyle.

Spitzer on Housing & Job Creation

Originally posted at AMERICAblog.

Eliot Spitzer has a piece in Slate wherein he offers advice to the President about how to reduce unemployment and fix the housing market. On housing, Spitzer writes:

The administration, in conjunction with the Federal Reserve, should insist that banks, in return for all the taxpayer subsidies they have gotten and continue to receive, reduce any mortgage that exceeds the value of the house. Once it is established that the homeowner is underwater, other variables can be considered to determine how much the mortgage should be reduced: the income of the borrower, the year the mortgage was issued, the behavior of the bank in recommending the mortgage, or the culpability of the borrower in misrepresenting income levels.Borrowers with reduced mortgages would have more money to spend, thus boosting the economy and relieving the housing market of a huge overhang. Owners would regain mobility, and the market could set a clearing price. Many also believe that the banks would come out ahead—facing fewer foreclosures, less abandonment, fewer houses stockpiled.

Spitzer is right that the weak housing market and the ongoing foreclosure crisis is a huge drag on the economy. Being underwater is the single largest predictor of a house being foreclosed. Large-scale principle reduction would be a way to keep homeowners in their homes, reduce foreclosures, enable more homeowners to move to pursue new jobs, and reduce the stress of unemployment and under-employment on the housing market. Spitzer is also right to point out that Wall Street banks already received their bailout from the American public. Asking for something in return now is fair and a stronger economy is better for both the housing market and the banks too.

On jobs, Spitzer’s suggestion is pretty simple:

He should establish a jobs program. Do the simple math: We are spending more than $110 billion annually in Afghanistan. Stop it. Or scale it back to the sort of covert operations and drone war that is warranted. Savings? Perhaps about $100 billion—per year. Use that money to create up to 5 million jobs at $20,000 each.

Repurposing money from war to jobs here in the US is undoubtedly a solid idea.

The real question becomes, does the administration want to pursue new ideas for job creation? Does the administration want to do what it takes to solve the foreclosure crisis? David Dayen thinks there are real new ideas that can be implemented by the administration, but they’re more interested in rehashing their original deficit reducing, job creating plans and bashing Congress for not taking action. Dayen likes Spitzer’s emphasis on the housing market and suggests a way for the administration to get widescale principle reduction without congressional say-so:

Fannie and Freddie own well over half of the mortgage market and they are full wards of the state. They could be employed to give mass refinancing deals or even principal reduction. The FHFA, Fannie and Freddie’s government overseer, has been reluctant to do this. I believe he serves at the pleasure of the President, so there are options to make that work.

It comes down to a question of what solutions the Obama administration want to deploy. It’d be great if the administration went this route, but I won’t hold my breathe for this sort of action.

Striking Verizon Workers Speak Out


This is a great video of striking Verizon workers speaking about why they’re out on strike and what the strike means to them. It’s clear that these are smart, savvy, informed union members. The workers in this video are just a few of the 45,000+ Verizon workers of the CWA and IBEW who are out on strike now. Laura Clawson of Daily Kos gives more background as to what the strike is about:

A New York Times story by Steven Greenhouse is revealing, placing the workers’ view—that Verizon’s demands are an assault on middle-class jobs—against Verizon’s argument that that’s not the case because Verizon workers could take a pay cut and still be considered middle class. That’s the company’s argument: There shouldn’t be a problem driving down benefits and job security, because by some measures workers will still be in the middle class—just hanging on by their fingernails instead of solidly so.So to management, the idea that this is about middle-class jobs is just some kind of cynical talking point. And that’s probably the most revealing evidence of just how much this is about middle-class jobs, because it’s about the very definition of what it means to be in the middle class (always a nebulous term anyway). Verizon’s official position is that what used to be a middle-class job—that what Verizon negotiated in their last contract as a middle-class job—is now too good for regular working people and that big chunks of the job security and benefits it offered must now be removed for that same job to count as appropriately middle class. If that’s not an idea to fight back against, I don’t know what is.

Will the 50 state settlement ever come?

Over at Naked Capitalism, Matt Stoller has a piece pointing out that for nine months the press has been reporting an imminent settlement between the banking industry and the fifty state attorneys general lead by Iowa’s Tom Miller regarding robosigning and fraudulent securitization, despite this settlement never coming. Stoller writes:

And so, the moral of the story is, the robo-signing/chain of title/overall mortgage securitization liability issue is a bear of a problem. It isn’t going away. So here’s a tip to journalists writing about the housing market. Don’t trust what Bank of America, Iowa Attorney General Tom Miller, various Federal regulators, Obama officials, and probably other bank-associated parties tell you.

Don’t trust the bank-friendly conventional wisdom, because it will end up making otherwise good stories inaccurate (this goes for headline writers as well). The banks don’t know their legal liability and the regulators don’t know how to fix this problem. And everyone’s suing everyone.

While it’s certainly true that most of the parties involved are likely content to produce a settlement in the absence of fully understanding what went on, there’s an extent to which settlement is difficult in the absence of real investigation into robosigning, fraudulent foreclosures, and securitization fraud. Or rather, in the absence of the sort of investigations NY AG Eric Schneiderman, DE AG Beau Biden and NV AG Catherine Cortez Masto say they are determined to pursue, it’s hard to know what a settlement would require. But given that the banks, Miller and the administration seem to want to shut off the ability of AGs to investigate like Schneiderman et alia want to investigate, there’s an inherent tension that is likely a factor in delaying any actual settlement from being reached.

Stoller’s right – reporters need to treat claims of an imminent settlement skeptically and they need to push back on past sources who said a settlement was around the corner. Maybe a settlement will emerge in the not too distant future, but nothing in the press coverage suggests that contemporary claims are more trustworthy than those which came before.