Category: Rule of Law

Brutal swing state housing poll for Obama

Cross posted at AMERICAblog

Campaign for a Fair Settlement, a liberal housing group which formed to pressure state Attorneys General like California’s Kamala Harris to not agree to a bad robosigning settlement deal, has released a poll that paints a brutal picture of how voters in swing states view President Obama’s handling of the housing crisis. The poll also shows that voters think the President hasn’t done enough to hold banks accountable and that criminal behavior by Wall Street has driven the crisis. The poll surveyed independent likely voters in Pennsylvania, Florida, Arizona, Nevada and North Carolina, all of which are states which have been devastated by the foreclosure crisis. From the poll release’s key findings.

  • The percentage of independent likely voters who disapprove of Obama’s handling of the housing and mortgage crisis ranged from 48% in Pennsylvania to 70% in Nevada, while those approving ranged from 21% in both Nevada and Arizona to 34% in North Carolina.
  • The percentage of independent likely voters who say Obama has not done enough to hold banks accountable for their role in the housing collapse ranged from 60% of respondents in both North Carolina and Florida to 73% in Nevada.
  • The percentage of independent likely voters who say that the economic crisis results at least in part from criminal actions by Wall Street executives ranged from 64% of independent voters polled in North Carolina to 76% in Pennsylvania.

The poll data is viewable here.

David Dayen notes that the problem is even more stark when you look at the partisan breakdowns within the poll:

Where this really shows up is in the partisan breakdown. There’s a partisan split in the polling, with Democrats generally supportive of the President and Republicans opposed. But independents are strongly negative on this question, worse than the overall numbers, from a 26-48 split in Pennsylvania, to 34-56 in North Carolina, to 28-49 in Florida, to 29-52 in Arizona, to a whopping 21-70 in Nevada.

The takeaway from this is pretty clear: the housing crisis could be a very big issue in the 2012 presidential election. The voters who will likely swing the swing states identify serious failings by the Obama administration and if they are convinced to vote on these issues, things would be pretty bad for the President.

In the statement, Nish Suvarnakar, campaign manager for Campaign for a Fair Settlement, says, “Obama can help homeowners, his campaign and the overall economy by more aggressively pursuing banks’ criminal acts and supporting meaningful solutions for underwater homeowners.” The Obama administration hasn’t done the work it has needed to do on housing and has ignored pressure from the left to take real policy actions, but perhaps they’ll be responsive to political pressure. If voters who care about housing policy and bank accountability exist as a bloc which can swing the election, the Obama campaign would be remiss to ignore them. Criminal indictments of bank executives for fraud and criminality relating to the foreclosure crisis would be a big step in the direction of showing the administration takes peoples’ concerns seriously. It’s unlikely that another milquetoast (or worse) program will convince people he’s serious – it’s time for the handcuffs to be broken out. Short of that, I’m not sure how the President will convince these swing voters in these key swing states that he should be trusted to better address the housing crisis in the future.

Konczal on Too Big To Fail

Mike Konczal has a very good post on the announcement of JP Morgan Chase’s multi-billion trading loses and what it means for our legal ability to deal with Too Big To Fail banks. Konczal writes:

There are two ways to look at the relationship between the Dodd-Frank financial reform framework and JP Morgan’s loss disclosure. One is that it shows the need for a strong implementation of Dodd-Frank broadly and the Volcker Rule specifically, which is designed to separate prop trading from large, risky financial firms. Marcus Stanley of Americans for Financial Reform has a great post up discussing what happened, how the principle of the Volcker Rule should work in this situation, and the threats it faces. Dodd-Frank is designed to make the financial markets more transparent and robust to shocks through such mechanisms as expanding clearing requirements for derivatives and reducing interconnectedness between large financial firms. It is also designed to make it less likely that any individual firm will collapse by having stronger capital requirements for larger financial firms and eliminating certain business lines they can participate in through the Volcker Rule. This is crucial for a Too Big To Fail firm like JP Morgan.

But the second is to acknowledge that businesses run profits and they run losses. There is something to a conservative like Kevin Williamson’s remark that “The odd thing about this is that it is now considered somehow scandalous when a business loses money. It’s a scandal when banks make profits, and it’s a scandal when they make losses.” On a long enough timeline, the survival rate for everyone drops to zero. Though it was clear quickly at 5 p.m. Thursday that JP Morgan wasn’t in danger of collapsing, if things had been different it could have failed.

This illustrates the need for a mechanism to allow firms to fail in a way that fairly allocates losses to the right parties. The way corporations fail in this country is a series of legal choices we’ve made, and we found in the fall of 2008 that the mechanism we have for a shadow-bank financial firm failing — Chapter 11 bankruptcy — dragged down the entire system with it. Hence the move to bring in the FDIC to make sure a financial firm fails in a way compatible with fairness. The FDIC has special powers — advance planning and living wills, debtor-in-possession financing and liquidity, making payments to creditors based on expected recoveries, keeping operations running, the ability to transfer qualified financial contracts without termination, and the ability to turn up or down regulations going into a potential resolution based on prompt corrective action — appropriate to what our 21st century financial system needs.

I think it’s worth noting, though, that these aren’t “legal choices.” They are political choices and they are choices in morality. Fundamentally these laws speak to the question of who government serves at a time when large corporations fail. What we saw in 2008 and 2009 (and, really, since then too) is that political elites have by and large chosen to serve financial elites first and foremost. Not only are the interests of banks protected, but they are protected through the public treasury. What we have now with Title II of Dodd-Frank, which governs the winding down of TBTF banks and who pays for it, is the perfect example. Matt Taibbi recently covered how Wall Street helped achieve weak financial regulatory reform, particularly around who pays for future bailouts for failed banks.

In a nod to FDR, Title II would have forced major financial companies to pay $19 billion into an FDIC-style fund that would cover the cost of any future bailouts. But then the balance of power in the Senate was upset by the election of Republican Scott Brown to Ted Kennedy’s seat in Massachusetts. As the clock wound down toward the bill’s passage, Brown insisted on a change: Instead of making ginormous companies pay $19 billion in advance, the FDIC would first use taxpayer money to pay for any bailouts, and then spend years trying to recover that money from Wall Street by means of an assessment process so convoluted that you could grow a four-foot beard in the time it would take to understand it. Republicans managed to wrangle support, in conference, for the “bailout now, pay later” idea, and it made its way into the final bill.

Fast-forward to 2012. Rep. Paul Ryan, the self-styled Edward Scissorhands of Republican budget slashing, gathers the GOP leadership together and tells the chairman of each committee that he wants them, collectively, to come up with $261 billion in cuts. Ryan demands $35 billion of the cuts come from the Financial Services Committee, which oversees much of the regulatory apparatus that would enforce Dodd-Frank. The committee is now chaired not by the reform bill’s namesake, Rep. Barney Frank, but by median-intellected Spencer Bachus of Alabama, who last year voted to delay Dodd-Frank reforms designed to prevent swaps disasters like the one that drove his home turf of Jefferson County into bankruptcy.

Bachus’ solution to coming up with massive budget cuts? Eliminate the entire Title II section of Dodd-Frank. If another­ bank failed, Bachus argued, it would take way too long to recoup the bailout money from Wall Street through that crazy assessment process that Republicans themselves had insisted on only two years earlier. In the end, the logic went, taxpayers would wind up footing the bill anyway, so better just to scrap the entire plan to have the FDIC pay for the bailouts upfront – thus “saving” taxpayers some $22 billion.

The logic, of course, is complete nonsense. Without Title II, we’d be right back where we started – rushing to implement an expensive bailout in the midst of a crisis, without any way to make Wall Street repay the money. But because Democrats had preemptively surrendered on the original idea of forcing Wall Street to pay into an FDIC-style kitty ahead of time, Republicans were now in a position to push the whole bailout plan off the pier via a simple budget resolution.

Title II of Dodd-Frank is also something, as Konczal notes, that Republicans in the House of Representatives voted to repeal last week. A weak and ineffective provision that had meager measures to actually make the banks pay for a bailout and would likely cost taxpayers (at minimum) billions was supported by Democrats. And even that is too much for Republicans.

It’s great that the JP Morgan Chase Fail Whale trade is re-surfacing discussion of financial regulatory reform. But to this point we’ve only seen political elites at the service of financial elites, deploying regulations in a way that shows their preference for wealth to be preserved in the hands of a few bankers (regardless of how often those bankers fail in their business operations). I don’t expect that to change any time soon, at least without the actual crisis of another Too Big To Fail bank failing and being bailed out with hundreds of billions of dollars from the public’s coffers.

Simple Answers to Easy Questions

At Newsweek Peter Boyer and Peter Schweizer ask:

Why Can’t Obama Bring Wall Street to Justice?

Because he doesn’t think they did anything illegal.

President Barack Obama, October 6, 2011:

The financial sector is very creative and they are always looking for ways to make money. That’s their job. And if there are loopholes and rules that can be bent and arbitrage to be had, they will take advantage of it. So without commenting on particular prosecutions — obviously that’s not my job; that’s the Attorney General’s job — I think part of people’s frustrations, part of my frustration, was a lot of practices that should not have been allowed weren’t necessarily against the law, but they had a huge destructive impact.

This has been another addition of Simple Answers to Easy Questions.

What Atrios Said

Duncan Black:

I’m not sure how anyone expects “the housing market” to “recover” when buying a house now involves handing a bunch of money over to a bank which will then proceed to steal your house from you.

This behavior will continue until lots of people go to jail. And that, apparently, is off the table.

This is probably the most succinct description of the problems in housing now, both in terms of recovery and stopping the foreclosure crisis from continuing for another three to five years.

Field on Foreclosure Fraud Settlement

As always, Abigail Field is a must-read in her ongoing coverage of the 49 state and federal foreclosure fraud immunization settlement. The fact that the settlement was approved by a federal judge with no hearings into it is both disappointing and truly sickening. Of course, as Field notes, the lack of transparency in this settlement is par for the course:

On Thursday, April 5th U.S. District Court Judge Rosemary M. Collyer announced she had decided to sign off on the ”$25 billion” Mortgage Settlement. By “announced”, I mean she signed the consent orders all our major law enforcers and the biggest bankers had agreed to, and entered them into the record. Judge Collyer didn’t actually say anything about the deal. She didn’t let anyone else say anything, either: she didn’t hold a public hearing on the deal.

In acting silently, Judge Collyer not only okayed the deal’s lousy terms, which institutionalize servicer theft and foreclosure fraud, she reinforced the incredibly poor public process that’s kept the enforcement fraud at the heart of the deal hidden. Deliberately hidden.

The rest of her post is a look at how the deal is presented in such a way as to misdirect people looking at it with allegedly new and beneficial mortgage servicing standards, while quietly institutionalizing and legalizing bank fraud and theft of homes. The problems with this are manifold, but just so you have a taste, here’s an excerpt of the post on the lack of clear and measurable servicing standards:

To recap: no one yet knows which servicing “standards” will take effect when, or if the deadlines will be extended as the deal allows. Until a standard is in effect, there’s nothing to measure compliance with. Worse, the the measuring process itself still has to be negotiated, so standards may take effect without a compliance process to verify implementation. Worst, the metrics let the servicers systematically steal from you and defraud the courts without risk of consequence. Heck, even if all servicing standards take effect before the deal expires, and all the work plans are finalized so that all the metrics are being computed, and banker theft rises to the level that a bank fails a metric, no penalty kicks in unless it’s the second quarter in a row that the bank failed that metric.

This deal has always been a shit sandwich. It’s just more clear now than ever before how big of a shit sandwich it is.

Update:

David Dayen has a post on the release of new servicing standards by the CFPB, which largely make the settlement’s standards irrelevant.

This would supersede the mortgage servicing standards from the foreclosure fraud settlement, as well as outlast them, because while the settlement standards expire after 3 1/2 years, the rules from the CFPB can be permanent. CFPB has statutory authority under Dodd-Frank to adopt rules for the servicing industry, so the vaunted “servicing standards” in the settlement will become mostly superfluous, or at least a stopgap.

Bloomberg’s “Clean Halls”

Matt Taibbi has a stunning report on an NYPD program put in place under Mayor Bloomberg called “Clean Halls,” which extends the already invasive and racist “Stop and Frisk” policy into the hallways of privately owned buildings, with the landlords’ permission.

According to the NYCLU, which filed the suit, “virtually every private apartment building [in the Bronx] is enrolled in the program,” and “in Manhattan alone, there are at least 3,895 Clean Halls Buildings.” Referring to the NYPD’s own data, the complaint says police conducted 240,000 “vertical patrols” in the year 2003 alone.

If you live in a Clean Halls building, you can’t even go out to take out the trash without carrying an ID – and even that might not be enough. If you go out for any reason, there may be police in the hallways, demanding that you explain yourself, and insisting, in brazenly illegal and unconstitutional fashion, on searches of your person.

Not surprisingly, Taibbi is able to identify the massive element of class warfare inherent in this sort of program emerging in our epoch of financial lawlessness:

Stories like this “Clean Halls” program are beginning to make me see that journalists like myself have undersold the white-collar corruption story in recent years by ignoring its flip side. We have two definitely connected phenomena, often treated as separate and unconnected: a growing lawlessness in the financial sector, and an expanding, repressive, increasingly lunatic police apparatus trained at the poor, and especially the nonwhite poor.

In recent years, as Wall Street firms turned into veritable felony factories, we had pundits and politicians who cranked out reams of excuses for one white-collar criminal after another and argued, in complete seriousness, that sending a rich banker to jail “wouldn’t solve anything” and in fact we should “tolerate the excesses” of the productive rich, who “channel opportunity” to the rest of us.

On the other hand, we’ve had politicians and pundits in budget fights and other controversies railing against the parasitic poor, who are not only not “productive” enough to warrant a break, but assumed to be actively unproductive (they consume our tax money and public services) and therefore sort of guilty in advance.

This is simply stunning and a stark reminder of how Michael Bloomberg is not the sort of politician any liberal should support. In contrast, he is a hardcore class warrior for for elites and by all appearances, he is winning his war.

Bill Black on the JOBS Act

Over at Naked Capitalism, Bill Black has a powerful piece in opposition to the financial deregulation bill that is misleadingly called the JOBS Act.

The JOBS Act is insane on many levels. It creates an extraordinarily criminogenic environment in which securities fraud will become even more out of control. One of the forms of insanity is the belief that one can “win” a regulatory “race to the bottom.” The only winning move is not to play in a regulatory race to the bottom. The primary rationale for the JOBS Act is the claim that we must win a regulatory race to the bottom with the City of London by adopting even weaker protections for investors from securities fraud than does the United Kingdom (UK).

The second form of insanity is that the JOBS Act is being adopted without any consideration of the findings of the Financial Crisis Inquiry Commission (FCIC), the national commission to investigate the causes of the current crisis. I am not aware of any proponent or opponent of the JOBS Act (other than me) who has cited the findings of FCIC. Everyone involved has ignored the detailed finding of a huge investigative effort. The FCIC report explained repeatedly how the three “de’s” (deregulation, desupervision, and de facto decriminalization) had produced the criminogenic environment that drove the financial crisis. The FCIC report specifically condemned the “regulatory arbitrage” that the worst actors exploited by choosing to be (not very) regulated by the “winners” of the regulatory race to the bottom. The FCIC report shows repeatedly how damaging the anti-regulatory fervor in general and the race to the bottom in particular proved.
…
The seventh form of insanity is that there is no greater killer of jobs than elite financial fraud. Such fraud epidemics can hyper-inflate bubbles (as they did in the U.S. and several European nations) and cause severe financial crises and recessions. The resulting Great Recession has cost over 10 million Americans their existing or future jobs in this crisis. It has cost over another 15 million people their existing or future jobs in Europe. The JOBS Act is so fraud friendly that it will harm capital formation and produce additional job losses. It may appear to be an oxymoron designed by regular morons, but that underestimates the abilities of the lobbyists that drafted this bill. They are not morons. They are doing faithful, clever service to their fraudulent clients. That makes them more dangerous.
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The tenth form of insanity is that the JOBS Act’s primary theme is dramatically reducing transparency in securities law. If there is any nearly universal principle that writers about the ongoing global crisis emphasized that we needed to learn it was the exceptional virtue of transparency. Greater transparency makes private market discipline possible, it greatly enhances regulatory effectiveness, it discourages fraud, and it aids investors in making decisions. The JOBS Act repeatedly embraces opaqueness. We have known for millennia that this increases fraud.

The JOBS Act is supported by the administration and has been passed by both the House and Senate, though the Senate made tweaks which will require the House to vote on it again before it goes to the President’s desk for signing.