Regulatory failure

Marcy Wheeler spots a new survey of 500 American and British bankers which suggests that not only do a significant portion of them feel comfortable with the idea of acting illegally to be successful, but that they believe regulatory bodies such as the SEC and FINRA are incapable of deterring illegal behavior by bankers. Marcy notes:

The two details, together, are more important than in isolation. Not only do a significant proportion of finance execs admit they’d engage in wrongdoing if they wouldn’t get caught, but they also say the SEC and FINRA aren’t going to stop them.

No wonder the banksters keep crashing the economy.

This also gets at Bill Black’s repeated descriptions of culture within Wall Street banks as criminogenic.

Bankers believe that not only is it OK to break the law to make millions, but that there’s nothing regulators are going to do to stop them. Separate from the personal ethical failures and character flaws that this reveals in the banking community, it is clear that the regulatory regime governing the banking and financial sector is a complete joke.

Moving on isn’t always right

Charles Pierce:

Bloody Sunday was what touched off the bloodshed that did not end until Bill Clinton and George Mitchell got both sides in a room and banged their heads together until they agreed to stop slaughtering each other. The fault for the modern outbreak of the “Troubles” lay always with the British military. This was a religious Sharpsville and it always was. Now, it seems, the reconstituted police force in Northern Ireland has decided to look into the possibility of bringing murder charges in connection with the shootings 40 years ago. This is why “getting past” things is not always a serious governing philosophy. A country that takes its history seriously knows this.

A Great Victory for Nick & Colleen Over Citibank

Nick Espinosa is an organizer with Occupy Homes MN, where he’s helped people facing foreclosure and eviction fight off the bank and keep their homes for the last eight-plus months. Nick is also well-known in activist circles for being the creator of the Glitter Bomb as a tactic in support of LGBT rights. In short, he’s a great activist who’s putting his full being into helping others. Unfortunately while Nick had been helping other families in his community, his mother, Colleen McKee Espinosa, received a foreclosure notice. After briefly falling behind on her payments, Colleen had repeatedly asked Citibank to let her become current on her mortgage, but they wouldn’t let her pay. Instead the bank moved to take the home, with a Sheriff’s Sale set for Wednesday, July 13th.

Thanks to organizing by Nick and other Occupy Homes MN activists, (which I help run), and countless supporters around the country, Citibank has come to the table and found a solution for Colleen and Nick, stopping the sale.

An official with CitiMortgage’s Executive Response Unit contacted the Espinosa family with news that Citibank had approved a loan modification that would keep the family in their home and reduce their payments by one-third on a 7.5 year payment plan. The dramatic news came less than 24 hours before the house was to be sold at auction on Wednesday, June 13.

“I’m so relieved that my family’s home of 16 years will not be on the auction block tomorrow,” said Colleen McKee Espinosa, a nurse and single mother who received widespread support after she pledged not to leave her home without a good faith negotiation. “We are grateful that Citibank has decided to accept my payments, and we look forward to signing the final paperwork.”

“I am deeply grateful to everyone from across the country who stood with our family as we fought our foreclosure,” said Nick Espinosa, Colleen’s son, and an organizer with Occupy Homes MN. “I’m inspired by the outpouring of community support, and it renews my commitment to stand with other families who are struggling to stay in their homes.”

This is a tremendous victory for Nick and Colleen and their community, as well as the entire Occupy Our Homes movement. But how did it happen and what should we take away from it?

Colleen’s choice to fight back was critical to victory. She decided to share her story and talk to her neighbors, Occupiers, and community organizers about how she could put pressure on Citibank to make a deal. Banks aren’t showing themselves willing to magically reduce homeowners’ principal out of the goodness of their hearts (let alone for the financial benefit of their investors). But homeowners who are standing up and saying that they are not ashamed to be fighting back are finding that they are can get solutions from the banks.

The banks want homeowners to be ashamed about being in foreclosure. They want us to keep our mouths shut, except to open wide while we take the bitter medicine of losing our homes. But Colleen’s story shows, as is so often the case, it’s not the homeowners fault for being in foreclosure. When the bank refuses to take your money, it’s obvious that it’s not your fault. When the bank defrauds you and sells you something other than what you were told you were getting, it’s not your fault. When the business you work for goes under and you lose your job in an economy that Wall Street broke, it’s not your fault for coming to foreclosure. When your government job is eliminated as part of austerity pushed by financial elites to, again, try to repair the economy that they broke, it’s not your fault when you get a foreclosure notice. Banks demand that homeowners feel shame for situations created entirely from bank behavior.

As McKee Espinosa says, “If anyone should be ashamed, it’s the banks for tearing apart our communities after we bailed them out with our tax dollars. When we stand together we can win, and I believe thousands more will.”

People like Colleen are showing us all that when homeowners fight back against the banks, they can win. While servicers aren’t rushing to make deals to keep families in their homes and keep chasing profits through foreclosures, when communities organize to help a family stay in their home, the banks are coming to the negotiating table.

The banks have destroyed so much of our economy. Over 7 millions homes have been foreclosed on and at least that many more are likely to happen over the next three to four years. A new study by the Federal Reserve (pdf link) says that median net worth fell 38.8% between 2007-2010, largely driven by a losses in housing. Policy makers, regulators, and politicians have failed to neither pursue legal accountability for bank crimes relating to the housing crisis, nor put in place programs to aid homeowners in crisis. In the absence of meaningful law enforcement and aid solutions, it is up to communities to rally together to fight off foreclosures, as Minneapolis rallied around Colleen and Nick.

Community pressure around brave homeowners like Colleen is producing solutions that are keeping families in their homes. It is forcing banks to behave with a shred of decency and humility. Indeed, it is the hope of the Occupy Our Homes movement that by forcing banks to change what their doing with foreclosures one case at a time, we can build up enough pressure to force banks to change their foreclosure mitigation policies nationally, so all  homeowners can benefit.

This is going to be a long fight, but Colleen and Nick are proof that homeowners can beat big Wall Street banks, if they stand up and organize in their communities and wield their power for change. Find out more at or


Netroots Nation Panel on Occupy Our Homes

I wanted to post this video of a panel I was on at Netroots Nation 2012 last week. It was called “Occupy Goes Home: The Occupy Movement and the Foreclosure Crisis.” On it with me were Sarah Jaffe of Alternet, Rachel Falcone of Organizing for Occupation & Housing Is A Human Right, and Nick Espinosa of Occupy Homes MN. It was a really great, powerful discussion and I was proud to be a part of it.

Watch live streaming video from fstvnewswire at

Netroots Nation compiled a good run-down of peoples’ tweets during the panel – you can check it out here.

Will Bunch on Obama’s Kill List

Will Bunch makes a very powerful and provocative point regarding President Obama’s radically reduced definition of civilians by making “all military-age males in a strike zone as combatants.” Moreover:

Counterterrorism officials insist this approach is one of simple logic: people in an area of known terrorist activity, or found with a top Qaeda operative, are probably up to no good. “Al Qaeda is an insular, paranoid organization — innocent neighbors don’t hitchhike rides in the back of trucks headed for the border with guns and bombs,” said one official, who requested anonymity to speak about what is still a classified program.

Bunch writes:

As for the morally indefensible position that any male killed in such an attack is “probably up to no good,” isn’t the Obama administration saying the EXACT same thing that George Zimmerman said about Trayvon Martin?

Ponder that for a moment.

Actually, the similarity with Zimmerman is even greater than I first thought. What he said to the Sanford police dispatcher was that Trayvon Martin “looks like he’s up to no good.” Thank God Zimmerman didn’t have drones, huh?

To be clear, when Zimmerman says this it is racist and outrageous. When President Obama and his security apparatus adopt this as policy, it is just as racist and outrageous.

Donovan taking credit for NV legislation?

In an op-ed in the Las Vegas Review-Journal which is largely about refinancing tools, HUD Secretary Shaun Donovan gives the Obama administration a heavy does of credit for a recent drop in Nevada foreclosure filings.

Too many homeowners in Nevada are still underwater or struggling to meet their mortgage, but the state has made real progress. Thanks to tools this administration has provided, foreclosure filings throughout the state have fallen 67 percent since last April.

Unfortunately it looks like the Obama administration is claiming credit for something they have zero right to. Last November, after Nevada passed an anti-robosigning law, foreclosures dropped 88%. The law made robosigning illegal, making it functionally impossible for banks to foreclose on the overwhelming majority of homeowners. That had less than nothing to do with the Obama administration.

Foreclosure filings in Nevada plunged in October during the first month of a new state law stiffening foreclosure-processing requirements.

Slightly more than 600 default notices were filed against homeowners through Oct. 25 in the state’s two most-populous counties, Las Vegas’s Clark County and Reno’s Washoe County. That was down from 5,360 in September, or an 88% drop, according to data tracked by, a real-estate website that tracks such filings. Default notices represent the first step in processing foreclosures.

Nevada’s state Assembly passed a measure that took effect on Oct. 1 designed to crack down on “robo-signing,” where bank employees signed off on huge numbers of legal filings while falsely claiming to have personally reviewed each case. Banks suspended their foreclosure filings one year ago and have gradually restarted them after those and other improper foreclosure-processing practices surfaced.

Among other steps, the Nevada law makes it a felony—and threatens to hold individuals criminally liable—for making false representations concerning real estate title. Individuals are also subject to civil penalties of $5,000 for each violation.

Foreclosures stopped because banks in Nevada can’t prove that they have a right to foreclose on Nevadans without running risk of going afoul of this law. Felonies are serious things and most bankers and their attorneys don’t want to go to jail for fraudulently foreclosing on someone. That’s the biggest reason foreclosure filings are down in Nevada and it has nothing to do what little the Obama administration has done on housing.

Obama’s kill lists

Lots of pixels are justifiably spilled today following a long, detailed article in the New York Times about the Obama administration’s use of kill lists, drone attacks, and other extrajudicial tactics for fighting perceived enemies. Except, of course, we find out that in this case enemies include any military age men in an area where we think Al Qaeda or other terrorists are operating and we can’t prove after the fact that they weren’t in fact terrorists. I highly recommend reading Glenn Greenwald, Charles Pierce, Scarecrow, Digby, David Dayen, and Marcy Wheeler.

I don’t have a lot to add beyond what the folks linked above have written. It’s all just so painfully outrageous and infuriating that this is being done in our name, let alone by a Democratic constitutional law professor, let alone by a Democratic constitutional law professor who used to oppose these things as a candidate for higher office. I will say this: if Mitt Romney wins in November, Democrats will at least go back to opposing things like extrajudicial killing, rendition, indefinite detention, warrantless wiretapping of Americans, and on and on and on.

The absence of a desire for strong regulators

Matt Stoller, writing at Naked Capitalism, has a really important observation about the two political parties and their shared lack of desire to have strong regulators looking at the banking sector.

The hearing was about District Court Judge Jed Rakoff’s refusal to sustain the Citigroup settlement with the SEC.  What was interesting about it, from a political standpoint, is that all three witnesses, including the witness brought in by the Democrats, opposed Rakoff’s move and supported the SEC’s position.  And one of the top Democrats on the committee, Carolyn Maloney, gave a long-winded opening statement in which she basically took the position that forcing an admission of wrongdoing was just too hard.  In other words, many high-level Democratic politicians, for all their gnashing of teeth about the need for regulation, aren’t being truthful.  They don’t want regulation, they want to be seen as wanting regulation.  And the Republicans, while they want to be seen as the party against regulation, are actually quite happy having regulators they can work with, regulators who protect the banks from state or local level action.

The argument over regulation or deregulation, in some sense, misses the point.  We need regulation, obviously.  But we also need strongly principled regulators.  And neither Barack Obama nor Mitt Romney has any appetite for that.

Stoller’s observation is important in that it crystallizes the sentiment of both parties being captured by Wall Street in an operationally specific way. And in Stoller’s telling, it’s hard to not come away with the impression that the Democrats are a good deal more cynical than the Republicans on the issue of regulation.

Elizabeth Warren comes out swinging on financial accountability

Last year liberals found a small handful of state Attorneys General to elevate as heroes for their efforts to investigate robosigning and hold banks accountable for committing foreclosure fraud. That cohort, which eventually acquiesced to the Obama administration and got on board a very weak settlement deal with the nation’s five largest banks, included New York AG Eric Schneiderman, NV AG Catherine Cortez Masto, and DE AG Beau Biden, among others. Schneiderman’s status as a liberal hero is now seriously being called to question by people who had previously put a lot of faith in him, myself included. Part of my takeaway from the last year is that while elected officials and candidates should be leading on these issues, words aren’t enough. Actions are what will determine whether or not these people are worthy of inspiring hope.

With that as a preface, Elizabeth Warren is on something of a tear going after the failures of recent regulatory reform and ostensible accountability efforts to adequately rein in Wall Street recklessness and criminality. She told Politico that Jamie Dimon should be removed from the New York Federal Reserve’s Board and sees the JP Morgan Fail Whale trade as a complete failure of regulatory reform:

“The argument for Glass-Steagall is that banking should be boring. Risk-taking should be separated from ordinary consumer banking. Banks are different from every other kind of company. They hold our money in trust and they get government guarantees. That fundamentally changes the game. The trade-off is they agree to engage in only low-risk activities. JPMorgan just showed that is not what they are doing.”

“I find it very interesting that at first the defenders [of JPM] said ‘Well, even if the Volcker Rule were in place this would not have violated it.’ First of all, I think people would be surprised [Volcker is] not in place. And it’s not in place because of this guerilla war banks have fought against it. … But the correct response is not that [the JPM trader is] OK because it wouldn’t violate the Volcker rule. The correct response is that the Volcker Rule isn’t strong enough and we need Glass-Steagall.”

While these are good sentiments and in line with what Warren has been saying for a while, they’re not that far outside what has become standard discourse by liberal Democrats since the announcement of JP Morgan’s $3 billion and growing trading loss.

However in an interview with David Dayen of FDL News Warren makes incredibly strong statements on the failure of the Obama administration and the mortgage fraud task force to hold Wall Street bankers accountable for the financial crisis.

FDL News: Can all of these issues with regulation and oversight of Wall Street ever be successful without them involving handcuffs in some manner? The efforts to hold the banks and their executives accountable have all resulted in slap-on-the-wrist fines and settlements. We’re four years on from a financial crisis that wrecked the US economy, one rooted in multiple levels of fraud, and no top executive has gone to jail for it.

Warren: And that is disgraceful. No one has been held accountable. Americans know that all the way down to their gut. The financial crisis has been treated as if it were a tsunami or a snowstorm, or a natural act for which no human being had any direct participation. The people who broke the economy should be held accountable. It’s as simple as that. And that means criminal investigations, civil investigations. Without that, it’s not possible to clean the system and rebuild it.

FDL News: Are you confident that the current set of investigations, including this task force co-chaired by Eric Schneiderman looking into mortgage abuses – there’s been a lot of controversy about it, about staffing and resources – are you confident that the investigations in place today will actually lead to the necessary accountability for Wall Street for their role in the crisis?

Warren: I am not confident. No. And that’s the answer to your question. The American people are pushing for more accountability. They need to keep on pushing until it happens.

It is significant for a top targeted Democratic Senate candidate to be saying she has no confidence in what was hyped as a major investigation by the President in the State of the Union and by AG Schneiderman when he assumed a role within it. Dayen notes that it “is extremely damaging to the attempt to pass off the RMBS working group as something legitimate” for Warren to say this.

As I wrote yesterday, President Obama is unlikely to convince independent swing voters in key swing states who think he hasn’t done enough to hold Wall Street accountable unless and until the handcuffs come out. Warren is saying that this is unlikely as things currently stand.

Hopefully the pressure from the polls and key Democratic candidates like Warren serves to light a fire under the administration and the mortgage task force. There is clearly no ingrained desire within the Obama administration to uphold the rule of law when it comes to bank criminality; one can only hope public political embarrassment will be a motivating factor. Handcuffs for banksters as part of a cynical election year ploy is far preferable to continued inaction.