Yves here. I hope you are as excited as I am that Dave Dayen will be posting at NC when the mood strikes him. Welcome Dave!
By David Dayen, a lapsed blogger, now a freelance writer based in Los Angeles, CA. Follow him on Twitter @ddayen
Greetings, NC readers! Yves has been nice enough to open up her Internet home to me, and I intend to grab the opportunity from time to time.
This offer turned fortuitous after I wrote a little piece from Salon on the “anniversary” of the securitization fraud task force, announced at last year’s State of the Union address. The scare quotes are warranted because, as I detailed, it’s hard to honor an anniversary of something that never really existed in the first place. I don’t remember annual celebrations of the founding of Atlantis, either.
Well, Katrina vanden Heuvel, editor and publisher of The Nation, got very upset at my characterization of the task force, and scolded me for taking a “victory lap.” I could spend this entire refutation on the revealing attitude behind that phrase. I would have been extremely happy to have been completely wrong about this whole matter if it meant that even one homeowner would get a measure of justice for what they’ve encountered. I don’t tally up my punditry on a whiteboard and seek out the showiest opportunities to boast about my scores.
But maybe I should tally up vanden Heuvel’s scores in this case. Because I don’t think she should continue engaging in this debate without a working knowledge of the underlying issues. Consider this opening:
The task force, co-chaired by New York Attorney General Eric Schneiderman, was something I applauded last January along with many progressives, who view it as a path to justice and relief for homeowners. We support it because it is vital that the mortgage servicers, lenders and big banks that dragged millions of Americans into foreclosure be held accountable. That was true then, and it’s true today.
Mortgage servicers and lenders, of course, have nothing to fear from the task force, since it’s ostensibly focused on securitization issues – hence the name “Residential Mortgage Backed Securities Working Group.” Servicers and lenders have already been released from liability with the foreclosure fraud settlement. I actually never saw the case for getting from findings of fraud on securitization, which did harm to investors, to relief for a completely different abused class of homeowners. At best it would represent an odd sleight-of-hand, at worst a perversion of justice. If you wanted to give homeowners relief, you shouldn’t have waived liability on the conduct that most directly affected them.
The lack of basic knowledge about the subject continues in this fashion. Vanden Heuvel claims that “Many are frustrated that the cases brought so far by the task force, against Bear Stearns and Credit Suisse, were in civil court, not criminal,” which is not the full story. In reality, the Bear Stearns and Credit Suisse cases are galling because they’re just rewrites of private litigation that could have been brought to court two years ago. In fact, the model for the Bear case was written by Karla Sanchez, then a lawyer for the mortgage bond insurer Ambac, who in early 2011 went to work for Eric Schneiderman. The New York AG didn’t need a task force enacted so he could walk down the hall and ask Karla Sanchez for a copy of her lawsuit to crib from. (Vanden Heuvel calls this a “creative case”; I agree that getting people like her to think this is new litigation when it’s just taken from a patchwork of old cases is creative!)
Let’s examine vanden Heuvel’s “real solutions” that she thinks can come out of this accountability-free mess, with another year passed since the crisis and another year of fraud consumed by the statute of limitations. She takes the typical DC progressive stances here. 1) it’s all the Justice Department’s fault, and we “need an investigation” to get to the bottom of the obstruction. Maybe Eric Schneiderman can get on a task force with the DoJ leadership and look into it. Then we have 2) the “Ed DeMarco triple-somersault with a twist” maneuver:
Second, the Obama administration has allowed a steady “drip” of minor cases and settlements to move forward against the banks without any coordination across agencies, rather than trying to maximize justice –- and settlement money –- for homeowners. These include cases brought by the Federal Housing Financing Agency (FHFA), which is notoriously soft on mortgage servicers.
It’s been nearly four months since Obama promised to replace Ed DeMarco, head of FHFA, who remains the administration’s biggest impediment to help for underwater homeowners. (See my column from last spring, “The Man Blocking America’s Recovery.”) The president now has no excuse to wait, not with qualified candidates in line for the job and the hardest-hit still waiting for relief four months on.
If vanden Heuvel actually attempted an argument connecting the task force to the federal conservator for Fannie Mae and Freddie Mac, I missed it. But DeMarco has been the convenient scapegoat for those who don’t examine these issues too thoroughly, so his name gets invariably tossed out there. This is ridiculous for several reasons. One, if there’s any agency in the federal government who actually has a record of trying to extract sums of real value from the banks for their conduct, particularly with respect to securitization, it’s FHFA, whose lawsuit against 17 banks over misrepresentations of mortgage-backed securities could net hundreds of billions of dollars. The fact that DeMarco is “soft on mortgage servicers” is irrelevant in relation to a fraud task force that has nothing to do with servicing.
Also, the President actually has an excuse at this point. The DC Circuit court effectively ended inter-session recess appointments, at least until the Supreme Court clears up the matter. So even if Obama fired DeMarco, they would not be able to replace him through that means. That leaves the options of replacing DeMarco with deputies of like minds, or a highly unlikely Senate confirmation (see the troubles with getting a CFPB Director through). Meanwhile, it’s amusing to have vanden Heuvel admit the Administration lied to her AGAIN before the election, by promising they would rid FHFA of DeMarco, only to do nothing. Somehow, the presumption of good faith remains.
Vanden Heuvel closes by linking to reporting from The Nation that’s five months old and actually says nothing about targets of the task force, as she claims. My favorite statement of hers about the potential value of the task force is when she says it has a significant “pending congressional appropriation.” A pending appropriation! Because everyone knows that in an age of sequestration, where every federal line item is due for a 6% haircut in a couple weeks, this is the perfect time for new congressional appropriations to take root! Just ask the House Republicans!
I suspect she’s really upset because of this:
Dayen blames groups like the Campaign for a Fair Settlement, the New Bottom Line, Move On and the Campaign for America’s Future (disclosure: I’m on its board) for buying in to the plot. In reality, though, these organizations have been pressuring the Obama administration for months to clean house at Justice, devote real resources to the task force and make it a top priority inside the White House.
Emphasis mine. And I’m sure the Administration trembles at the pressuring from the groups that sent out glowing press releases a year ago about the “real leadership” shown by the President in announcing a task force that, by this own admission, carried no guarantee of resources or prioritization.
Look, nobody likes having to admit they’ve been duped. But I reject the assertion that there are only two courses of action here, that “we can either fight to see that this investigation is real or we can take our ball and go home.” That fight over the investigation is doomed. What would be useful is to examine the role of these DC progressive groups, who continue to build coalitions aimed at “pressuring” the White House and who continue to fail in spectacular fashion.
Well-meaning people all over this country concerned about any number of issues hand over their hard-earned money to these groups, and they aim to speak broadly for liberal values. The accountability doesn’t stop on Wall Street. It needs to be shared by the DC progressive community. I’ve gotten enough correspondence in the wake of my Salon piece to know that the majority of them now believe they were fooled, vanden Heuvel’s bravado notwithstanding. It would be incredibly worthwhile to exercise some self-examination at this point, to question the entire value of building these ad hoc organizations at the edges of the halls of power, and then working through polite channels and gentle nudges to get as much progress as possible, as long as it doesn’t disrupt being able to sit in on meetings with senior Administration officials and the like.
We talk a lot about broken models. The DC progressive model is broken. It does nothing but facilitate the injustices readily evident in this case. A good use of time at the next board meeting would consist of a moment of self-examination, and maybe entertaining a motion for dissolution. Those of us demanding justice and accountability will always have to fight for it, and maybe next time we could use some colleagues with more than a squirt gun.