Sometimes, when you’ve dug yourself a really, really deep hole, the only option is to keep digging in the hope you’ll somehow come out the other side.
We’ve been perplexed for months with the persistent PR push to pretend that the formerly “50 state” attorney general mortgage settlement negotiations were going anywhere. And bizarrely, in true zombie fashion, the press push continues unabated even as the talks are effectively dead.
As we pointed out, the departure of Kamala Harris, the California attorney general, last Friday means the state AG participation is pretty much moot. Enough important states have abandoned the talks that even if all the remainder were to go forward, it wouldn’t buy banks the desired protection from litigations.
But these talks were destined to fall apart; the only question was how quickly. Both Dave Dayen at FireDogLake and your humble blogger pointed repeatedly to the disconnect between the story that kept being pumped out every three or four weeks since January that a deal was mere weeks away. Yet every leak contained enough substance to demonstrate that the two sides were hopelessly far apart, and thus no pact was imminent.
Now of course, this wasn’t and isn’t a state AG effort. The DoJ, HUD, and various Federal banking regulators are also at the table. The participation of the AGs was important to disguise the fact that the Obama Administration wants to say it got a deal as proof that it is taking concrete steps to address the housing crisis. But these negotiations were clearly Son of HAMP: presented as a way to help homeowners, but since anything that might inconvenience the banks was off the table, the program likely did more harm that good (many consumers lost their homes as a result of being misadvised by the banks as to how the program worked, particularly that they’d be assessed late fees and expected to make up the payment shortfall if they were give a trial mod but not a permanent mod).
The persistent effort to promote the idea that the mortgage settlement talks were moving forward has the hallmarks of a concerted PR effort. And there’s further reason to suspect the hand of the Treasury Department in this effort, since there is no reason to believe that Tom Miller’s office would have the savvy or the contacts to orchestrate a national campaign. Our Tom Adams noted that stories were repeatedly fed to reporter who weren’t on the mortgage beat (like Ben Smith of Politico) who would be certain to lack the expertise that would enable them to ask tough questions. Matt Stoller pointed out nearly two months ago that it was silly for reporter to keep repeating the officialdom’s party line that a deal was nigh when it was obvious no such thing was happening.
So what do we have today? The preferred outlet for securitization industry stenography masquerading as news, Housing Wire, trumpets that the settlement talks are moving forward! Yes, and so did Napoleon’s 1812 Russian campaign. Remember, the Emperor of France actually took Moscow but then abandoned it, at huge cost in men and materiel.
We suspect this campaign will prove to be equally successful for Tom Miller.
Jon Prior of Housing Wire, to whom fell the sorry task of painting lipstick on this pig (the article is titled “Iowa AG forges ahead in servicer settlement“), seemed unable to recognize headline-contradicting information in his account. From the article (hat tip Matt B):
Iowa Attorney General Tom Miller said he would forge ahead with the mortgage servicer settlement talks despite losing two key states in recent weeks, California and New York.
Yves here. Two states in recent weeks? New York has been out for months, and the tally of states that have withdrawn from the deal is much larger than two. Add Massachusetts, Nevada, Kentucky, Delaware, and Minnesota to the list.
Now get this part:
She [Harris] was the only other AG office in attendance at a meeting between the multistate coalition and mortgage servicers a week ago to settle an investigation into how widespread faulty servicing practices had gone. In her letter, Harris said the latest proposal between the two sides wasn’t good enough.
Huh? The only other AG motivated enough to show up at the latest session was so turned off by where the negotiations stood that she withdrew? If someone who was willing to deal decided the banks were being unreasonable, it isn’t hard to imagine other AGs who have been unwilling to play a visible role feel the same way.
Readers may think we are making overmuch of this example, but this is an important case study of how the Obama Administration has tried to use messaging to fool the public into believing it was acting their interests when its first priority was and continues to be to prop up the biggest banks. We believe that the more people understand how these con games work, the less effective they will become.