Matt Stoller: Memo to Reporters – How to Cover the 50 State Attorney General Foreclosure Settlement Talks

By Matt Stoller, a fellow at the Roosevelt Institute. He is the former Senior Policy Advisor to Rep. Alan Grayson. You can reach him at stoller (at) or follow him on Twitter at @matthewstoller

everyone I know is working on some type of RMBS litigation. investors suing issuers, issuers suing originators, insurers suing issuers. wildA tweet from a NYC corporate lawyer, 8/17/2011

Doesn’t it seems like we’ve been on the verge of a 50 state Attorney General settlement with the banks over robo-signing and mortgage securitization liability for nine months? It does, doesn’t it? Why is that? Maybe it’s because… that’s what journalists keep writing.

Here’s what I mean.

July 15, 2011, Huffington Post

As Government Nears Accord With Banks, Questions Swirl Over Scope Of Investigation, by Shahien Nasiripour

Even so, state and federal officials are nearing a settlement that would release companies like Bank of America and JPMorgan Chase from legal liability in exchange for a cash settlement, reduced payments for homeowners, transition assistance for troubled borrowers and promises to improve performance and comply with state and federal rules.

July 7, 2011, Bloomberg Businessweek

BofA, JPMorgan Near Foreclosure Deal With U.S., States, by Dawn Kopecki

Bank of America Corp., JPMorgan Chase & Co. and three other U.S. mortgage servicers are in advanced talks to resolve state and federal claims over faulty foreclosures, according to two people briefed on the matter.

Negotiators tentatively set a July 13 target for a settlement, which may exceed $20 billion, the people said, speaking on the condition of anonymity because the talks are private.

July 7, 2011, Charlotte Observer

Negotiators make progress in mortgage talks, by Rick Rothacker

Banks and state and federal officials negotiating a settlement over mortgage servicing practices have made “substantial progress” but there’s still “work to do,” a spokesman for the attorney general leading the effort said.

July 7, 2011, Fortune

Can Brian Moynihan fix America’s biggest bank?, by Shawn Tully

Then, in late June, Moynihan rocked Wall Street by unveiling a landmark settlement that takes a giant step toward finally putting the home loan mess behind Bank of America. Moynihan announced that BofA will pay $8.5 billion to 22 big investors — from BlackRock (BLK) (to the Federal Reserve Bank of New York — which claimed that Countrywide had misrepresented the quality of loans it sold them. In a single stroke, he effectively removed the biggest cloud over the company’s future The deal is so comprehensive, covering all of Countrywide’s disputed mortgages sold to private investors, that it should serve as a model for the rest of the industry and a bullish sign for the broader economy. It may be the single best headline in financial services since the credit crisis began. “It’s a win on the board that Brian Moynihan needed,” says Credit Agricole analyst Mike Mayo, a famously tough critic of the big banks. “The challenge is to ensure that the momentum continues.”

This one isn’t about the 50 state AG deal, as such, but it’s on mortgage liability. Besides, it’s such an obvious PR plant for Moynihan that I had to include it. And BofA stock has dropped 32% since it came out!

June 2, 2011, LA Times

Foreclosure settlement to come in a ‘matter of weeks,’ HUD secretary says, by Alejandro Lazo

June 10, 2011, Businessweek

Foreclosure Probe ‘Closer’ to Settlement, Iowa Official Says, by Margaret Cronin Fisk and David McLaughlin

Iowa Attorney General Tom Miller, leader of a 50-state probe of foreclosure practices, said a settlement is “closer” and that state and federal officials want a monitor to ensure that banks keep their promises.

March 15, 2011, Reuters

Geithner seeks swift foreclosure pact with banks, by Dave Clarke and Rachelle Younglai

A comprehensive settlement between U.S. authorities and banks over alleged mortgage servicing abuses needs to be reached quickly to help the housing market heal, Treasury Secretary Timothy Geithner said on Tuesday…

Iowa Attorney General Tom Miller, who is leading the states’ probe of mortgage servicing problems, said last week that he hoped to have a settlement with the nation’s biggest banks in the next two months.

March 7, 2011, Reuters

Iowa AG looks to foreclosure deal within 2 months, by Dave Clarke

The Iowa attorney general, who is leading the 50-state probe into mortgage foreclosure problems, said on Monday that he hopes to have a settlement with the nation’s biggest banks in the next two months.

February 24, 2011, Washington Post

Government settlement with financial industry over foreclosure practices draws near, by Brady Dennis

State and federal officials, who have been negotiating with financial firms over how to address widespread abuses in foreclosure practices, are moving closer to a settlement that could force banks to reduce the principal on mortgages for some borrowers who owe more than their homes are worth.

November 16, 2010, Reuters, CNBC

Banks, state AGs near foreclosure settlement: report, by Jonathan Stempel and Jonathan Spicer

U.S. banks and a task force of the nation’s 50 state attorneys general are nearing a settlement of an investigation into the lending industry’s foreclosure practices, CNBC said on Tuesday.

October 12, 2010, AP

States aim to force changes in foreclosure process, by Alan Zibel

The top law enforcement officials of states around the country are launching a joint investigation into the problems with foreclosure documents that surfaced in recent weeks. They are already weighing the outlines of a potential settlement with the industry, said Iowa Attorney General Tom Miller, who will lead the investigation.

And so, the moral of the story is, the robo-signing/chain of title/overall mortgage securitization liability issue is a bear of a problem. It isn’t going away. So here’s a tip to journalists writing about the housing market. Don’t trust what Bank of America, Iowa Attorney General Tom Miller, various Federal regulators, Obama officials, and probably other bank-associated parties tell you.

Don’t trust the bank-friendly conventional wisdom, because it will end up making otherwise good stories inaccurate (this goes for headline writers as well). The banks don’t know their legal liability and the regulators don’t know how to fix this problem. And everyone’s suing everyone.

So how can you write about it? Well, do what other analysts (like Yves Smith) do, look at the actual content. Felix Salmon has a good example of how to do that here, with his post on The well-intentioned but doomed mortgage settlement. And the first story I cited, by Shahien Nasiripour, (aside from the “they’re on the verge of a settlement” CW) is great, showering important details on the actual state of the investigation. Or press your sources on why they told you a settlement was coming, when it didn’t. It’ll be an interesting explanation, which I’d like to hear.

Maybe the AGs will come out with a settlement tomorrow. But for the last nine months, that’s pretty much what the reporting has been saying. And it’s been wrong.

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  1. woodrow

    Or, The Government will wave it’s magic wand again and make it all disappear courtesy of Taxpayers. Possibly back-door it all through the “Make Americans Feel Better Act”, or amend “The Patriot Act” to cover The Banking Cartel. Now perfectly legal.


  2. Crimogenic Awfulness

    Pointed questions must be asked of the ruling cabal, but they won’t be, because the 4th estate has a choker collar too.
    Wouldn’t it be reasonable to assume that Federal Crimes would need the attention of Eric Holder? Isn’t doing nothing equivalent to the violence of indifference?

  3. Wendy

    Matt – great article and great point – yet again, critical thinking seems to be completely AWOL among the corporate media. A question for you – what is the range of outcomes of the AG objections to the settlement? Can those objections prevent the settlement outright, or if they are successful, will they simply opt out citizens of those AG’s states from the settlement being binding on them?

  4. Bill

    I have a question for everyone who wants the admin to take a much harder line on the banks: let’s say a genie grants this magic wish for all of you. Let’s say, for example, Bank of America and Citigroup are “found” to be bankrupt, and subsequently go belly up.

    Let’s sweeten the pot further and say Holder sues Goldman for criminal activity, and it, too, goes belly up. THREE big, evil, US banks put out of business? Liberals everywhere rejoice….

    My question is this: have any of you ever thought about what happens NEXT in that scenario? Do you all want a repeat of fall, 2008, only worse? Because granting your magic wish to destroy a handful of big US banks and brokers will make Lehman look like a stroll in the park.

    Likely result of three (or even one) big, globally interconnected banks getting “forced” under: interbank lending dries up; LIBOR skyrockets; MMMF’s break the buck again; markets globally sell off in dramatic fashion; 401k’s everywhere take major hits; corporations pull in their risk appetite again; mass layoffs start up againb; unemployment rates skyrocket; civil unrest gets even worse. Oh, and Obama loses the 2012 election in a landslide.

    You can’t blow away one, two, or three “evil” banks just to satisfy some liberal pipe dream fantasy. No one globally wants a repeat of post-Lehman. Reasonable people in the administration understand this.

    You may not like this post, but those are the facts. Flame away…

    1. tawal

      Bill, this would be the best route of the most unequal society in the history of the world. Housing is a public utility, like water, air, electricity; we don’t need credit to provide these rights.

    2. Jon Valjon

      Yes, Bill, let’s not “satisfy some liberal pipe dream fantasy”, but, rather, continue to condone criminal behavior. That’s ultimately better and the country and world will be better. Right? (/snark)

    3. john newman

      It wasn’t armageddon in 2008 and should by some fluke the rule of law be reasserted against our financial overlords whom you apparently admire, it would not be armageddon then.

      The tools exist to resolve these criminogenic enterprises without disrupting their necessary functions. What is supposed to happen when “capitalist” enterprises fail is that their owners and managers are supposed to loose their assets and jobs. Where something like a capitalist market effect to perturb our system the entire financial superstructure would be liquidated.

      Should we choose to become a capitalist democracy ruled by laws again, this will be the first step. And it wouldn’t be the end of the world, just the end of looting by the frauds that currently control what used to be an economy, I’m not quite sure what to call it now.

      1. Cindy Elmwood

        I was going to reply to Bill but you just said what I was going to say. Banks have been put into temporary receivership and broken up successfully at previous points in history, it wouldn’t be the end of the world.

        And painting all liberals as anti-bailout and conservatives as pro-bailout is wrong, too. REAL conservatives such as Michael Shedlock, Karl Denninger, etc, are also in favor of letting the banks take their medicine and not postponing the cleaning up of the system.

    4. Doug Terpstra

      You can’t blow away one, two, or three “evil” banks just to satisfy some liberal pipe dream fantasy.

      Speaking of flaming, Bill, your provocative tribal taunts, your limited box-framing of issues, and your manifest ignorance of the substance of this site betrays you as a drive-by troll and/or shill for lesser-evilism and premature capitulation to financial terrorists.

      But to your loaded question: yes, the demolition of a termite-riddled bankster system is essential, of course, that’s obvious to anyone paying the slightest attention; but it’s only the start of a new foundation for an equitable and sustainable economy. That too would be evident to anyone who spent any time on NC.

      And changing the corrupt mismanagement of banks does not mean Armageddon as the extortionist-terrorists you shill for would have us believe. There are sound, constructive reforms that must follow the blowing away receivership of evil banks, including the nationalization of the Criminal Reserve Cartel itself.

      Some of us also want supermax prison terms as meaningful deterrent to further rank fraud; we want an end to political bribery and lobbyist-written legislation, undeserved taxpayer bailouts with obscene bonuses; an end to bankster wars including CIA drug wars and the surveillance police state they have spawned; an end to regressive taxation, corporate loopholes, corporate welfare, reckless self-serving deregulation, and the austerity-fueld looting of the public commonwealth. We do want significant WPA/CCC public investment in productive jobs including alternative energy, infrastructure, including hi-speed rail, a serious response to climate change and other environmental threats, fair trade, workers rights, support for unions, etc., etc. In short we want transformative, revolutionary change.

    5. reslez

      According to the law of the land, insolvent banks must be shut down. Isn’t obeying the law a conservative value? Coddling political insiders and campaign contributors by allowing their zombie enterprises to totter along simply prolongs instability. Isn’t stability a conservative value? You see, we have this thing called the FDIC. Its purpose is to resolve troubled banks before they can infect the rest of the economy. You don’t shut down huge banks like flipping the switch on a lightbulb. You take them into receivership or planned bankruptcy to prevent systemic repercussions.

      No bank is forever immortal, untouchable and immaculate. No dread armageddon lurks behind the balance sheet of BOA or CITI. What was created can be sundered, and anyone who says differently is a fearmongering shill.

    6. faintfuzzy

      Bill, you need to develop a bit more trust in capitalism. If these istitutions go sideways, they will be replaced in a matter of days. Capitalism abhors a vacuum. This scenario actually has happened in the past with little or no hysterics. The only addition I would like to see is to bar the present cast of miscreants from the finance world for life. Let them make french fries of dig ditches, some line of work where they can no longer cause mischief.

  5. john newman

    This is what the rule of law looks like in a capitalist economy:

    It isn’t the end of the world, in fact in this instance it actually spared the state of Texas from the ravages of the current mortgage disaster because in the wake of the S&L disaster described in Bill Black’s post that state implemented REGULATIONS that prevented the predations you seem to believe it is essential fro the government to support.

  6. Senka

    If we don’t stand up right now, we may as well be dead, because this is no life anymore, this is pure slavery!
    Please read about MA Essex County Register of Deeds and his fight to uncover the truth, to help us protect our basic property rights. Do you want to see what over 25,000 fraudulent, robosigned docs look like?! Be my guest:

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