I don’t know who is pulling the strings, but any objective look at the so called mortgage settlement negotiations shows that a lot of people are being played for fools. Precisely because Elizabeth Warren is being attacked so forcefully by the Wall Street Journal and other banking industry loyalists, too many of her erstwhile defenders are giving a free pass to the fact that the Administration itself is undermining her, and with her, any attorneys general who sign up for the settlement, assuming it ever sees the light of day.
Recall the Team Obama modus operandi: getting something done, no matter how lame, compromised, or even counterproductive it is, is considered to progress because it presumably can be swaddled in enough propaganda to be made attractive to a presumed to be chump public. Never mind that Obama’s flagging poll ratings and the abysmal mid-term Congressional results, where the Blue Dogs, the Democrats philosophically most aligned with Obama, were mowed down, show that that strategy is becoming less and less effective. Recall in the runup to the mid-terms how many Democratic Congressional candidates were straining to distance themselves from Obama.
The Democratic state attorneys general have even less to gain by playing nice with this Administration. Some are from states that are solidly liberal and/or so hard hit by the mortgage meltdown that being seen to be soft on banks would be political suicide.
Obama himself is clearly enamored with the theatrics of governance. And why not? His assumption is that as long as he looks meaningfully less conservative than the Republicans (which now can be plenty conservative), big swathes of the country will vote for him by default. And now that the Supreme Court Citizens United decision has raised the likely cost of winning the presidency to $1 billion, currying favor with big corporate donors, which of course includes banks, is of paramount importance. So any roughing up is a staged affair.
We have long been of the view that for Elizabeth Warren to think she could make any lasting headway inside with an Administration fundamentally opposed to what she stands for was wishful thinking. Now I have no doubt that this wishful thinking has not developed in a vacuum, that she has been, ahem, encouraged to be unduly hopeful about the odds of her getting the nod as the first head of the Consumer Financial Protection Bureau.
But as with General Petraeus, the move to bring her into the tent was all about keeping the Administration’s enemies closer. It has been particularly keen about neutering critics on the left. Early on, it cut off institutional funding of liberal interest groups that failed to maintain message discipline. Our DC contacts tells us the Obama has now moved up the food chain and is working to defund think tanks deemed to be too pinko (for instance, we were told of one, with all the particulars, that was dumped by a longstanding $1 million a year donor).
Even though Geithner might make a show of considering Warren’s views, he and she are philosophically 180 degrees apart. Not only Geithner’s position has never been so strong, he has managed to stake out a much large scope of authority than past Treasury Secretaries.
It’s quite clear that Warren (and derivatively, the 49 state attorney generals) have been set up even from what little we can see at a remove.
1. It appears she has been given, or fallen for the trap of accepting, a role where she has responsibility but no authority. Anyone who has every worked in a big organization knows they are the kiss of death. At ABN Amro, it was such a well-known way to ruin careers that it was called “the hall of hollow mandates”.
2. Her ability to take ground is further weakened by the strong relationship between Obama and Geithner. She an employee of the Treasury, an advisor to both the Department and the President. She wants to make fundamental changes in the way one of Obama’s most important funding targets does business, which is a hard sell. And even in the absence of those mercenary considerations, Obama is risk averse. Moreover, by all accounts, he and Geithner are so in tune with each other that their relationship has been described as a “man crush.” Unless they have a lover’s spat, what would ordinarily be an uphill battle is more likely to be a Sisyphean exercise.
3. On the mortgage settlement, she is being made the fall guy for an initiative that she joined after it was well underway. She is being presented in the media as the moving force behind the mortgage settlement. In fact, that was initially an affair solely in the hands of the state attorneys general, led by Tom Miller of Iowa. In one of the numerous Congressional hearings on the mortgage mess in November, I recall Tom Miller going out of his way to praise the cooperative relationship with Treasury, in particular, with Michael Barr, then then Assistant Secretary to Financial Institutions. My antennae went up when I heard that; what was Miller doing “coordinating” with Treasury? The Treasury has indicated publicly, repeatedly, that it has little authority over servicers. And the state law issues are very different than Federal. Yes, some polite briefs of Federal regulators might be a smart move, but the state AGs have their own interests and turf to protect.
What happened, it seems, is that the Federal regulators decided to get in front of an incipient mob and try to call it a parade. They announced a complete whitewash of an eight week mortgage exam, apparently as a way to pretend to know something and insert themselves further into the state AG process. As we noted:
And as we saw in the House Financial Services committee hearings on mortgage documentation issues last week, it took persistent grilling by Maxine Waters to establish that regulators aren’t even imposing fines or sanctions for known problems in this arena, which strongly suggests they aren’t even willing to use the powers they do have….
This “review” is clearly a Potemkin exercise, yet another stress test-type charade, in which the facade of a serious investigation is used to sell the message that all is well in the banking industry.
4. Miller, as we have indicated repeatedly, is not representing the attorneys general. He is working on behalf of the Administration. The first version of the term sheet that was leaked, a 27 page version, was depicted as a product of the AGs. However, by all accounts, the process is being driven by Federal regulators ex the OCC, which seems out to end run the main effort, or perhaps be positioned to pounce if it implodes. For instance, consider this account by Shahien Nasiripour of Huffington Post:
Sources said many of these details were constantly changing, sometimes from day to day, as proposals zipped from agency to agency. They have not yet been shown to the targeted banks, nor have they been publicly disclosed.
The documents also show that regulators questioned many of their own ideas.
And this, from Dave Dayen of Firedoglake:
Democratic AGs and senior staff, who spoke off the record because of Tom Miller’s lead role in the case, said that they only received the term sheet, seen as a first offer to the banks, a couple days before the meeting, and didn’t know until they got to the meeting that it would be a big topic of discussion. And then, not only were the AGs told about the term sheet and the push for principal write-downs to save as many as 3 million homes from foreclosure, they were told they would have to make someone from their offices available full-time to enforce the terms of the settlement.
Why should any state AG put up with this shabby treatment? They can go their own way and not be part of a window dressing exercise on behalf of Team Obama. Right now, the state AGs and the Administration have no smoking gun. They could easily force the banks to heel by conducting real investigations, but instead seem to prefer bluffing when the banks know they have an empty hand.
And we further have Tom MIller’s office changing his story. We’ve have no evidence of any investigation; his office confessed to as much a couple of weeks ago, as Gretchen Morgenson of the New York Times told us:
Mr. Miller declined to be interviewed about the proposal. But Geoff Greenwood, his spokesman, disputed the notion that the attorneys general have done no investigation. “We have dealt with this issue for some three and a half years on a day-to-day, front-line basis with consumers,” he said. “We know what the problems are, and we know what needs to change.”
Maybe so. But being able to produce reams of deposition testimony from bank employees and documents turned over under subpoena would give those negotiating for consumers and mortgage investors far more leverage than they’d have working with a series of talking points.
And per Shahien Nasiripour last week:
The state group has not yet filed a complaint detailing their findings and the violations of various states’ laws. While some states individually have sent banks formal investigative requests for information — and received reams of documents in return — they haven’t yet acted as a group.
Now we suddenly have Miller claiming there was an investigation, per a later story by Shahien:
“That’s a big price to pay for the additional investigations,” Miller said of the potential delay. He added that state regulators had conducted an in-depth audit of Ally Financial, a state-regulated firm and the fifth-largest mortgage handler in the country, according to Inside Mortgage Finance. It was the “most in-depth analysis and investigation of any of the [mortgage] servicers that has been done or will be done,” Miller said.
State regulators will use their findings from Ally as part of the settlement negotiations with the other large mortgage firms, Miller said, as practices were likely the same across the biggest firms.
So we have one quote by Miller, to a publication that is basically a mortgage industry reporting service (as in a large number of its stories are what Eddie Bernays would call propaganda, namely initiated by industry sources trying to make some favorable noise). If you believe this was a meaningful investigation, I have a bridge I’d like to sell you. Given that Ally was the first servicer to be caught robosinging, the odds are high that any investigation was limited to that topic, which the banks have already been trying to clean up.
And “most in-depth exam that ever will be done”? Is this an Administration threat through Miller? This is nonsense. State AG investigations of foreclosure mills and ongoing litigation against Lender Processing Services, which provided the processing backbone to the servicing industry, have the potential to blow open more issues. We are also aware of litigation being readied that is likely to open up additional fronts against the servicers.
For Republicans, it’s a no-brainer not to put up with this rubbish. It takes a bit more intestinal fortitude on behalf of Democrats. Eric Schneiderman of New York has come out vocally against the process, and Lisa Madigan of Illinois has also expressed strong reservations. Catherine Masto of Nevada is by all accounts not going to participate, although she has yet to make a statement to that effect (Nevada and Arizona both have litigation underway against Bank of America; that alone argues against joining the settlement). They should be applauded for refusing to be railroaded by an Administration and an opportunistic state AG that is perfectly content to sell them out. I can only hope that more like minded Democratic AGs will also voice their objections to the process and content of the settlement and better yet, bolt and conduct their own exams and file lawsuits as warranted.
Let me put on my deal-making hat and tell you where my instincts say this is going to come out. Tom Miller’s earlier signals, confirmed by a later report by Dave Dayen, is that the Administration wants a deal in six to eight weeks.
This is a naive approach given the state of play and is likely to backfire. You can only lock people in a room to do a deal (which given the number of moving parts and the lack of consensus even among the Federal regulators, is what this amounts to) if people have agreed to do a deal or you have leverage over them. This does not apply to either the AGs or the banks. Even worse, the Team Obama types can’t even get their own act in gear. The AGs when they signed up to a process that would be driven by the Obama Administration to serve its interests. They didn’t agree to the shape of the table and have every reason to decamp for this reason alone, that what was billed as a negotiation they would conduct with the banks is instead turning into cramdown as far as they are concerned.
The banks have a different calculus. They know the Administration and the AGs are shooting with blanks. The OCC reported in Congressional testimony that the eight week whitewash found only problems when “circumstances had changed”, like HAMP mod problem or changes in terms for active duty servicemen. So the Feds can’t make big threats to bring the banks to heel to do a deal. Similarly, the servicers know the state AGs don’t have a case either, save for robosigning abuses, which is not worth anywhere within hailing distance of the $20 to $30 billion being bandied about We’ve said it is inadequate for the broader abuses and is also too small to have any impact on the housing market. The objective should be to get the servicers to do or pay for principal mods that come out of investors, who’d be happy to have mods to viable borrower rather than costly foreclosures and sales of not-properly-maintained or secured properties, often in markets with a lot of inventory overhang.
But the banks DO know that if anyone got around to investigating, or if things grind on in court long enough, enough Bad Stuff is likely to surface that will embolden some AGs to go after them. And a couple of successful AG cases will lead to more private suites, perhaps even some class action theories. All the AGs have to do is start with low hanging fruit like the foreclosure mills (even an embarrassingly weak settlement with a Florida foreclosure mill yielded $1 million to the AG’s office, so these actions are probably attractive from an economic standpoint) and go up the food chain. The foreclosure mills, when attacked, often turn on Lender Processing Services, which implicates the servicers without violating attorney-client privilege.
So the banks know they are vulnerable if anyone decided to go after them in an organized fashion. So the one thing the AGs can offer that they might want it a broad release, which is exactly the thing we have said the AGs should not provide. How can you release a party when you don’t have the faintest idea of what they might have done?
And the disarray, plus the inexplicable time pressure, works against a sound deal getting done. As international negotiations show, multi-party deals take a lot more groundwork among the participants, and that is utterly wanting here. Artificial time pressure on people who don’t see eye to eye or aren’t persuaded a deal is necessary is likely to lead to various parties jumping ship. And it works to the advantage of the banks, who can simply hang tough, come to meetings, and play non-negotiable (which means either that the folks at the Administration are utterly clueless, or alternatively, are using the phony claims of a need for haste to provide the backdrop for conceding to the banks).
So I see either no deal or a very weak, bank friendly deal with a broad waiver as its centerpiece. And I’d bet the banks trade concessions that have an official price tag of at most $5-$7 billion. Plus given the weak track record of compliance on past servicer settlements and HAMP, there’s no reason to expect them to live up to that.
And if Elizabeth Warren puts her name on a settlement like that to try to increase her odds of getting the CFPB post, she will have proven she’s willing to sell out on what she stands for. I can only hope that she, like some of the Democrat AGs who can already see where this is going, would walk away from it instead.
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Yves,
Great post. Unfortunately in their haste to cover up for the banks, Team Obama does not consider that their actions will only cover up, but not cure the underlying problems. These underlying problems continue to get worse. Ultimately, they will need to be addressed (the policy of extend and pretend more often than not fails). Only the timing is uncertain. The only question is will the problems need to be addressed during Obama’s term (say when he is running for re-election) or not.
Richard
Monumental points, Richard, but of course, the point is to continue on the colossal Ponzi-Tontine scheme until the vast majority are reduced to neoserfdom and neofeudalism.
2012: Predatory Capitalism, R.I.P.
It’s going to get even nastier…..
The analysis of who Barak Obama is & what he’s really up to is hard work, but things are becoming clearer. Let’s try out the blockquote command:
This is precisely what Obama’s done his entire career. Screw up the job he was hired to do (community organizer, state legislator, US senator) in favor of running for the next higher office.
I didn’t think there was a higher office, but I am not clever like he is. Turns out, there is: Board member on all the leading corporations, CEO of his pick of them.
Obama has lots to look forward to. Has there ever been a truly failed US president? Someone so odious that no one would touch him?
Here’s a good sample of how Obama really works:
Get serious, Davy boy, how can he be less conservative when he has a 100% neocon administration, just as Bush #2 had, just as Clinton had, just as Bush #1 had, just as Reagan had?
Actually, neither Bush #1 nor Clinton had *100%* neocon administrations. And Reagan tried to, but he didn’t after the execrable Goresuch was sacked.
“I don’t know who is pulling the strings” , this group is
http://www.alec.org/AM/Template.cfm?Section=Home
How interesting. I’ve never heard of this group before, ever, and now I’ve run into it twice today:
“The historian, William Cronon, is the Frederick Jackson Turner and Vilas research professor of history, geography and environmental studies at the University of Wisconsin, and was recently elected president of the American Historical Association. Earlier this month, he was asked to write an Op-Ed article for The Times on the historical context of Gov. Scott Walker’s effort to strip public-employee unions of bargaining rights. While researching the subject, he posted on his blog several critical observations about the powerful network of conservatives working to undermine union rights and disenfranchise Democratic voters in many states.
In particular, he pointed to the American Legislative Exchange Council, a conservative group backed by business interests that circulates draft legislation in every state capital, much of it similar to the Wisconsin law, and all of it unmatched by the left. Two days later, the state Republican Party filed a freedom-of-information request with the university, demanding all of his e-mails containing the words “Republican,” “Scott Walker,” “union,” “rally,” and other such incendiary terms.”
http://www.nytimes.com/2011/03/28/opinion/28mon3.html?ref=opinion
Apart from the fact that Cronon is an employee at UW, Madison, which has all the academics citing “academic freedom” and all the public employees debating over when FOIA requests are legitimate, this seems to me to be a CLEAR case where a political party is following a citizen to his workplace in order to pressure him into silence.
Cronon has a *personal* blog on which he has made analytical commentary on the situation in Wisconsin and he wrote a completely ordinary op-ed for the NY Times of the sort we read from academics (and others) all the time.
http://scholarcitizen.williamcronon.net/2011/03/15/alec/
http://www.nytimes.com/2011/03/22/opinion/22cronon.html
I suppose the GOP in Wisconsin thinks this FOIA request for Cronon’s UWM e-mails is legitimate given that UWM gets about 20% of its funding through state appropriations, but this seems like a case of political retaliation for the exercise of citizenship rights to me.
This from a Governor who angles for bribes from out of state astroturfers.
“ALEC”=new version of DLC-DLC having totally soiled their own sheets with American public..
just as “Teaparty” largely invented to shut Weimar Republic(con) minds off to “neocon”…
The 2012 election clock is getting louder. If the deal on the Bush tax cut extension is any indication, we will see a resolution of a number of issues in a way that both sides can claim victory — but everyone else (ahem, that’s you and me) is a loser.
Apparently Repubs are now suggesting that the CFPB be headed by a committee of five (because one person would have too much power).
Damn Girl! You are some kind a Lady!
Your ability to consume enormous amounts of technical data, analyze it, reconfigure it in lay terms and journalized form is nothing less than amazing.
I never read economic blogs until I accidentally bumped into yours.
About Liz Warren: She’s been working hard to get a modicum of financial fairness and justice for the middle class during most of her career and Obama knows it. He’s cynically playing her by dangling the lure of real power and what she could do with it. Of course, he has NO intention whatsoever to let her loose against his biggest donors.
Pretty sadistic if you ask me. But Prof Warren ought to be able to let go her dream of changing things from the inside. She can only be effective from outside, by becoming a twisting thorn in the side of the politicians. Washington is a bottomless pit of sleaze, mediocrity and sociopathic lust for greed and power. Those who want to do good are mercilessly ejected while the selfish, the clueless and greedy bandits win the day.
I mean…just look at the fact that Congress specifically excluded themselves from the provisions governing insider trading. Then, stop asking yourselves how it is possible for such a bunch of incapables to generate a CAGR of 34% (!!) when they get elected until they leave office.
May I remind everyone that 34% CAGR is only within the reach of the best traders in the world? How can non traders like Congresspeople get such incredible results once in office?
It’s called cheating…but it is legal. Proof positive that what is legal ain’t necessarily moral.
And Prof Warren STILL harbor any hopes?
Fascism pure and simple. Marriage of the corporations and government and just who is on top in this copulation of the two is a good question. I vote for the corporations.
Nothing will get done here unless private litigants do it. I have long since lost faith in AG’s to do anything meaningful for the public.
The problem that private litigants have, is the corporate bench who, by virtue of having been on the corporate payroll for years prior to taking the bench, can’t see anything other than the corporate way.
Corruption of the government at every level by the corporations, means that nothing will change short of a revolution. Sad. But that has been my conclusion for some time now.
Both the government and the corporations no longer care what the people think at all. They don’t even give lip service to the idea any more.
So true, davidgmills! They all just consider us chumps who pay the bills and run around in mazes of their design.
Doesn’t anyone KNOW Professor Warren? I’ve seen her speak before on the double-income trap, but I don’t know her.
Someone whom she knows and/or trusts needs to have a come to Jesus with the woman. They will destroy her, and are actually well on their way.
Ina, in such times there are some things worse in life than having your career destroyed. I know some brave souls willing to face the consequences of attempting to mitigate losses for the public. Many of these folks will not even be remembered at all or if so, after they are gone and historians recall their deeds. The song by John Lennon Wheels go Round comes to mind.
Jason, of course there are worse things. But this is not a career for her, it is a crusade to educate people on the forces ripping apart the middle class in this country. And naturally there are so many unsung. But logically, those points are unrelated to the fact that Prof. Warren needs an intervention.
And it is always a tragedy to see a good person destroyed publicly, regardless — especially to see a person who has devoted her entire academic life to studying, quantifying, explaining, and working against the those ruining quality of life in this country knocked out of the fight.
Perhaps she considers it on the job post-collapse management experience. And the mere fact she is being targeted so viciously makes the curious start to ask why.
Dean Baker highlighted some research Mckinsey did in 2008. Mckinsey started doing pyschographic research and putting the data into tribes that describe the behavioral propensity of certain individuals. One of those tribes were called “The Righteous” or something to that effect. This group was 8% of any given population.
The data suggested these individuals are coded to be crusaders against the polar opposite of themselves with a similar percentage. Such
I suppose in theory these two groups battle it out to restore the balance of our species with the rest of the population in-between these propensities.It would be interesting to see someone like Martin Armstrong put some cyclical timing to these cycles.
Such individuals like Elizabeth Warren will not stop until the balance has been restored. Murdering them be it the old way or character assasination, the new way of attempting to silence them turns them into martydom status which draws massive public attention.
So she either waits it out for inevitable power-sharing or the fascists continue to attempt to destroy her with only highlights her cause even more so. Especially when targeting a lady. I can’t speak for her, just making best educated guesses as to why she continues to suffer for attempting to assist the public.
When Elizabeth Warren speaks, I hear Bill Black’s voice.
Both speaking truth, both marginalized. And Black’s no martyr.
Iceland’s hired Bill Black to help resolve their crisis, yet here at home he’s toxic to his natural allies in govt, like Warren.
My gut tells me its going to be as tough to shut Warren up as it is to make Bill Black’s disappear.
I also think she’s more of a threat to Geithner, and may have more leverage, from the outside to ensure the CFPB accomplishes her goals. If she’s rejected and acts as a vocal spoiler from a safe spot at Harvard, she’s poised to be more powerful than whoever the WSJ endorses for the CFPB head.
Michael,
You are missing the objective here. If she gets stuck with enough tar babies, her reputation will be tarnished. Ralph Nader was feared yet he operated completely on the outside. If she does not quit and has her name on some servicer settlement abortion, who will trust her?
I’m actually hoping she will declare victory in the CFPC, and run against Scott Brown for senate. I’ll work for her campaign if she does.
I’m starting to think that the only way for the party formerly known as the Democrats to become anything other than the slightly kinder, gentler plutocrat cronies is for Obama and the Blue Dogs to crash and burn.
Admittedly the transition to an actual two party system might be painful as that other party and their current wackos takes over, but what alternative do we have?
“the Supreme Court Citizens United decision has raised the likely cost of winning the presidency to $1 billion”
An amazingly big sum for a political campaign, but an amazingly small sum for buying at least 1/3 of the US government. Great ROI.
How did Jerry Brown win the gubernatorial race when he was outspent 7 to 1? The Citizen’s United decision might ultimately just be a convenient excuse for the Democrats to argue they have to cater to corporate wishes to continue to be the party of the working class. What a farce.
“There must be some kinda way out of here, said the joker to the thief. There’s too much confusion, I can’t get no relief” (Jimi Hendrix)
We the people need our voices heard and it appears that’s not happening, so we need to turn up the volume. Call the WH and give them hell 202-456-1111.
erm, that’s Bob Dylan (‘All Along the Watchtower’)
Yeah, but Jimi embellished the third chord.
Anybody remember the end of the show The Shield where the corrupt Vic Mackey cuts a blanket deal for immunity with inept prosecutors who have no idea how bad he’s been??
Once signed he then owns up to every horrible thing he’s ever done so as to have all those crimes covered by the immunity deal?? The prosecutors are left staring at their shoes like dopes having basically given him a free pass in exchange for chump change.
I wouldn’t be surprised if the banks pull a ‘Vic Mackey’ here.
The most baffling thing about the whole Ag investigation and settlement thing has een the leadership of an AG from Iowa. Iowa? Florida, Nevada, California, Arizona etc. all come to mind as places being destroyed by the housing crisis, but Iowa?
My only conclusion is that Tom Miller is secretely planning on running for the presidency since the first caucuses are in Iowa. Or, he really is Tim Geithner’s stooge since most of the really nasty transgressions are state law issues and Geithner can only watch with frustration without getting someone on the inside.
Obama these days is reminding me of the Mel Brooks’ character in Blazing Saddles. “Work, work, work!” while signing anything put in front of him.
It seems that the GOP is having trouble finding a candidate among their ranks who doesn’t come across as a raving maniac. Seems to me the perfect opportunity for Obama to change his party affiliation to one more compatable with his actual policies. He could easily change his speechwriters, and at least is capable of speaking in complete sentences unlike his predecessor. He wouldn’t have to pretend to be a progressive black man any more, and all those nasty birthers would loose their financial support from likes of the mad dog Koch Brothers because he was now officially one of them.
Amazing the level of denial that Liberals are capable of– believing that we actually have two political parties that provide any meaningful choice of policy directions.
By the way, Obama has been an wholly owned property of the vulture capitalist class since the first time he ran for public office. Speculation about his lack of gonads is completely beside the point.
Thank you for providing this story. We can hope for some sort of Renaissance in ten or so years.
“And if Elizabeth Warren puts her name on a settlement like that to try to increase her odds of getting the CFPB post, she will have proven she’s willing to sell out on what she stands for.”
Man, that would be brutal, wouldn’t it? Standing shoulder to shoulder with Geithner, a vacant Warren stares blankly into the camera and slowly enunciates the position of “The Administration.”
“Both the Treasury Secretary and I are in agreement this proposal will be goooood for the middle-class.”
That shit’s “Invasion of the Body Snatchers,” or something.
Not to harp, but there is an exquisite typo:
“Robosinging” instead of robosigning.
Beautiful typo, exquisitely done. :-)
Outside of that: can anyone be surprised, given the Chicago background? This is typical gaming of a developing opposition, bamboozling the public and doing whatever you can get away with without being caught, which, given the compliant and willfully ignorant press, will simply not happen for the MSM.