50 State Attorney General Effort to Sell Out to Banks Makes Even More Egregious Offer

The so-called 50 state attorney general mortgage settlement negotiations (a bit of a misnomer, since at least 4 attorneys general appear to be out, and various Federal banking regulators are alos party to the deal) are looking more and more like a desperate effort to reach any kind of a deal so as to save the officialdom’s face. The only good news is the banks are so insistent on total victory that despite the efforts to pretend the talks are making progress, the odds of a deal being consummated still look remote.

It is nevertheless frustrating to continue to see the media depict the flailing about by the attorneys general headed by Tom Miller as progress. I’ve been involved in negotiations for much of my career, and I’ve never seen so much incompetence on open display. The Financial Times headline, “US banks offered deal over lawsuit” is substantively misleading. You can’t credibly put forward a proposal unless your side has signed off on it. Yet he has just made an offer that his own side may not support. And this isn’t the first time Miller has pulled this trick.

Per the Financial Times:

According to five people with direct knowledge of the discussions, state prosecutors have proposed settlement language in the “robosigning” case that also might release the companies from legal liability for wrongful securitisation practices.

Some state officials have expressed concern that they have offered the banks far too broad a release from liability. Others say the broad language was perhaps inadvertently crafted and will be tightened as negotiations continue. Participants on both sides stressed the talks remain fluid.

This text suggests reservations well beyond those expressed by the attorneys general known to be likely to refuse to sign onto the “50” AG effort: Nevada, New York, Delaware, and Massachusetts. All have expressed reservations about an overly broad release, which is the first concern mentioned. That means these four, and perhaps additional attorneys general, fall into this group. But note that the article says that others think the release was drafted ineptly, which suggests they were not opposed to a release covering issues beyond robosigning if it was well crafted. That further suggests, as we have inferred from other news stories on the progress of the talks, that Miller at a minimum is doing a poor job of representing his side and is keeping them at a remove. Or it may point, as we suspect, to the fact that he now has his manhood at stake in getting an agreement inked. That means he is effectively working on behalf of the banks against his fellow attorneys general, since his side looks to be more malleable than the banks (the assumption probably is that the AGs will yield to the banks’ position to reap several hundred million dollars in blood money for their budget starved states).

What is also astonishing is the notion expressed in the extract above, that some of the AGs seem to think that the release language may get tougher. Huh? If it has been presented to the banks, as the headline of the article suggests, that would be a major retrade, and would be treated as operating in bad faith by the other side. That hope is simply bizarre, and I wonder if Miller tried to sell it to some unhappy AGs to minimize dissent.

The article later gives more of the substance of the proposed release, and it isn’t hard to see why some attorneys general have reservations:

The worry over the states’ counterproposal stems from its treatment of loan documents. The term sheet proposes to release the banks from legal liability over how mortgage documents were maintained, prepared and transferred, people familiar with the matter said.

Though the counteroffer attempts to release the banks from liability with respect to home repossessions, and explicitly states that the release does not include securitisation claims, the language is broad enough in that it could prevent state officials from bringing securitisation claims in the future should they sign up to the agreement.

At the heart of securitisation claims, which involve missteps in how home mortgages were bundled into bonds, are allegations that the banks did not properly maintain and transfer documents from one step in the complicated chain to the next.

The securities law issue is a headfake; the statute of limitations has passed for securities litigation on these deals, save for ongoing representations made in periodic filings (which is a real issue for the servicers and trustees, and note that the major trustees, such as Bank of New York, Deutsche Banks, and US Bank, are not party to these talks and hence would not be covered).

While it is hard to know from this remove exactly what is contemplated, this to release the banks from liability for chain of title issues has the potential to blow up in the AGs’ faces in states hard hit by the housing meltdown, since this issue will stay in the public eye as borrowers continue to use chain of title arguments to forestall foreclosures.

But even with Miller doing his damnedest to drag his colleagues towards the banks’ position, the banks are continuing to play non-negotiable:

However, the banks – some of whose share prices have been battered by concern about their exposure to mortgage-related litigation – are pressing for immunity from a raft of alleged civil violations and have called the latest proposal a “non-starter”.

They say the proposals from state prosecutors will need to be expanded before striking a deal, which is expected to involve a total penalty of $10bn to $25bn.

The two sides will meet again this week to iron out their differences. They are close to an agreement on future standards governing the servicing of home loans, yet remain far apart on other issues, such as legal liability claims, compliance and enforcement, and the amount of cash it will take to settle the allegations.

It looks as if Miller has become committed to getting a sizeable settlement and therefore is trying to back into a juicy enough release to get the banks to sign off on a big enough number. And his and the Feds assumption with the AGs is that they will cave if they are offered the chance to bring hundreds of millions in settlement dollars to cash-strapped states.

But from the banks’ perspective, any release by AGs and Federal regulators will not stand in the way of private lawsuits. Nevada, New York, and Delaware are pressing ahead with their investigations into those issues. Any resulting lawsuits will help stoke private litigation. So the defections by a small group of tough-minded AGs makes a settlement by the rest vastly less valuable.

Lordie, this is deja vu all over again. As we said in July:

The latest update is comical, if you read between the lines. The deal is cash for a release. Everything else is decoration. And both sides of that deal are falling apart. The banks are squabbling among themselves as to who has to pony up what, with everyone except maybe BofA posturing that they really don’t owe that much. Oh, and the other side of the equation, the release? The banks and the AGs are not on the same page.

But if you read the Wall Street Journal article on the state of play on talks, you might well be fooled by the upbeat tone and the emphasis on the agreement on the stuff that does not matter (we and others went through the original AG term sheet, and it was pathetic, since virtually all of it was nice sounding exhortations which merely having the banks agree to comply with existing law!). For instance:

All sides have agreed to a framework that would govern how banks meet their obligations once a deal is reached. Those include principal reductions on certain mortgages, forgiveness of second-lien loans, restitution to borrowers and dealing with foreclosure-related blight. A person close to one of the banks said remaining differences are narrowing.

Earth to base, “remaining differences” are irrelevant if the biggest items aren’t close to resolution.

I wish someone would put this effort out of its misery. But as long as the media keeps treating the Miller/Federal regulator PR as serious, yours truly will have to keep debunking it

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  1. Black Smith

    Someone smart tell me; how much worse would it be if we let the banks fail? Bad or unbelievably bad?

    1. Fraud Guy

      Well, very bad for execs, stockholders, and bondholders for these banks.

      Very bad for title claims, as the shakeout will probably further muddle (if that is at all possible) the broken title chains of the last several+ years.

      Near complete panic in the markets as the top banks disappear, but , to the good side, a chance to rebuild them properly.

      1. Way Hung Over

        If the Banks get fined, where does the money come from to “pay” for these fines? In the literalist sense please.

        1. Hunt and Gather

          “execs, stockholders, and bondholders” = status quo yes?
          Let’s examine the millions of way-ward, no 401K, no pension, paycheck to paycheck mom n’ pa kettles, with a credit card for emergencies – would they be hurt at all if Jamie Dimon was slapped? The “free market” would just ooze right in to fill their Bankin’ needs eh?

          1. chris

            If we had a free market system that may be the case but the free market is no where to be found in the United States. If we had a free market system we would not be in this mess right now. I would have been over by 2009 after banks failed and were purchased at a discount by investors who then gave discounts to homeowners and reduced principal balances. The pricing could have bottomed and sales would have picked up once people were not trapped in their homes.

    2. Up the Ante

      Start with bad, and when the chaff falls from the sky it will be seen as chaff.

      “.. the sudden avalanche of money sent Miller’s way. The numbers are laughable. In 2006, out-of-state donors gave Miller’s campaign $10,508. For the 2010 cycle, that number was $497,357.”

      Tom has some out-of-state admirers, does he?

    3. Linus Huber

      We actually can choose between a slow process of evaporation in dilusion of a rapid pace. Or maybe we cannot even choose and the markets will suddently enforce a real fast evaporation of delusional values.

    4. attempter

      It wouldn’t be bad at all. It would be a great thing. Finance is a tyrant. It produces nothing, but only steals and destroys. The only reason anyone would argue against letting the banks go down, and helping them to perish, would be out of fear of the short-term disruptions while we rebuilt real economies free of this tyranny, and also out of simple brainwashing and inertia, how hard it is to imagine a world without Wall Street. But that would be a vastly better world in every way imaginable.

      Thus we have the spectacle of commentators who explicitly say “the banks are bad, but we’re stuck with them and have no choice but to bail them out.” But that’s a lie.

      It’s ironic that those who say that tend to be “liberals”. (Conservatives are more likely to still claim the banks are good and worth having in an absolute sense. But there’s been a pro-bank convergence with liberals as well.) By their own government-loving lights, an obvious solution is at hand – have government directly print and stimulate, and do whatever else is necessary to bolster Main Street while Wall Street is dismantled. The fact that they don’t demand that proves how liberals are in the bag for the big banks every bit as much as conservatives.

      (I don’t want or call for the government solution myself, since we need to relocalize our economies, and that’s the real solution. But also, it would be a waste of time to wait for kleptocracy to engage in “good government” action. That’s why e.g. MMT has value only as an educational tool and as a criticism of corporatism, not as a guide to affirmative policy.)

    5. Another Gordon

      Bad for corrupt bank execs; very good for the rule of law.

      And, since the real economy depends on the rule of law to function, that means good for main street after the short term disruption of big bank failures.

    6. JD

      To have the Big Banks disappear overnight would be hard on the people of the nation because so many patron services and lower level bank jobs would be lost.

      The approach that would work is for the FDIC to take over the banks and put the leadership in jail while bringing in new management and keeping employees in their jobs and the doors open. The hot derivative paper could be written off and the show of solvency by these big insolvent banks could end. Glass-Steagall would have to be brought back to end bank speculation and get bank money put into productive loans again.

      After all, our current economic problem is caused by a credit shortfall of about $15Trillion.

      1. Tom Key

        Excellent post. You are one of the few to recognize that what the predators stole, under color of pretending to be bankers, was a vast amount of consumer Credit.

        The fact that real banks, or even a Government-backed program like the Marshal Plan, could and would rapidly supplant the investment-banks who destroyed themselves, is what makes the “bail-out” so inexplicable.

        1. Seize The Trillions

          Oh gosh yes, save the tellers and the loan brokers and the hustling managers at the retail level grifter storefronts.
          Is that what we want, to save the knickle and dimers, the thieving rentiers who sometimes rape for a living? How about doing some real work for a change? You know, the same things the precious financial sector has been yelling, publishing and legislating against real workers in this country for the past 40 years:


          “Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. ”

          Bernie Sanders Amendment for GAO Audit:

          “The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. “

          1. Black Smith

            Krugman just said we have a roughly 6% GDP shortfall. I calculated that’s roundly near $1 trillion/year.

            And we loaned banks at least $1.2 trillion?

            It boggles my mind.

          2. Fraud Guy

            This is very amusing, as I have an in law who works at a retail bank, who continuously blames consumers for the problems that tanked the economy, and that the banks are blameless.

            When I asked if they had actually read the full prospectus of what the banks are currently selling, they claimed ignorance, even though pushing those “products” is their current job.

    7. Maximilien

      @blacksmith: “Someone smart tell me; how much worse would it be if we let the banks fail? Bad or unbelievably bad?”

      I’m not smart, just fairly well-read, but here’s my response:

      The banking folks tell us it would be unbelievably bad. The “let er’ rip” folks tell us it would be not so bad. Ergo, using the Wisdom-of-Crowds Principle, the actual outcome would probably be somewhere in the middle of “not-so-bad” and “unbelievably bad”. Sorry, blacksmith, that’s the best my crystal ball can do.

  2. Cheyenne

    Here’s what I never got about any settlement that can be reached between state AGs and robo-signing banks.

    Let’s say a pro-bank settlement is reached tomorrow. And that on Friday, B of A submits robo-signed papers in a foreclosure lawsuit in state court somewhere, and the homeowner contests BAC’s standing on grounds that its proof of legal injury is a nullity and was indeed forged.

    Would BAC actually point to the broad settlement in its effort to litigate the foreclosure issue? If so, wouldn’t the homeowner argue that “I wasn’t a party to the settlement and thus waived no legal claim”? And wouldn’t the court point out that the settlement is neither stare decisis nor legislation and thus at best non-binding authority?

    What exactly would the scope of any settlement be? Sorry for sounding ignorant, but it just doesn’t seem possible for state AGs, however inept or corrupt, to sweep the banks’ real monster under the rug. And that doesn’t even get to the question of whether every prior foreclosure judgment hinged on robo-signed documents is altogether void, since standing is a jurisdictional issue…

    1. CaitlinO

      That’s my question, too. There’s a filing for RICO action up at 4closurefraud right now against Chase with some two dozen named plaintiffs in 8 states. Can bank-fellating Pam Bondi really disappear a law suit like this which includes non-FL citizens just by signing Miller’s agreement? If I were a plaintiff, it absolutely would not make sense that I would be prohibited from seeking damages for wrongs done to me because some bimbo in another state would rather serve banks than people.

    2. Yves Smith Post author

      That’s correct. The AGs can only waive their state’s right to sue. They cannot waive the rights of third parties.

      The reason for getting the AGs out of the picture is:

      1. AGs are better positioned to develop cases that require serious investigation. For instance, the Nevada AG included servicer fraud (false/overstated charges) in her suit against Bank of America. Even when borrowers are convinced they are victims of this sort of abuse, it is too costly for them to pursue that sort of case. They will fight based on chain of title

      2. AG suits provide a lot of useful information that helps private plaintiffs. They can use it in their pleadings, so it makes it easier for them to litigate

      3. AG suits legitimate certain types of legal arguments. Investors in particular are very conservative, they might ruffle feathers if they were to sue a bank. But if a lot of AG suits established that banks engaged in a certain type of bad conduct, an investor would look remiss for not suing to recover damages.

      1. Cheyenne

        Thanks for the explanation. I wonder how many state-initiated lawsuits have been stayed, putatively to help negotiations advance, to staunch the accumulation of docket entries on PACER.

        I also wonder how many of the state AGs have read the oaths they took to become lawyers within the last 1-2 years. To become an officer of the court in a state, you have somewhere along the line agreed that your priorities are (1) the court, (2) the public, and (3) the client.

        Whose interests are the state AGs advancing, because the answer isn’t apparent from (1) – (3)?

    1. Cheyenne

      That WaPo piece is brilliant in its complete inaccuracy and utter irrelevance to the issues. From the top of the piece:

      “no one has produced evidence that large numbers of homeowners who were current on their mortgages were cast out of their homes because of bank misconduct.”

      That statement is wrong on the facts and legally irrelevant. On the facts, Bank of America has foreclosed on properties paid for in cash. Hard to be more current than “paid off.”

      The legal issue isn’t whether the homeowner is current on their mortgage, it’s whether the foreclosing bank has standing to sue, i.e., a legal injury. Without a promissory note, the bank lacks any legal injury required to sue in the first instance. Is it not misconduct to forge and fabricate evidence to establish a pretext to foreclose? Why yes, it even has a name: fraud on the court.

      What nonsense from WaPo.

    2. JD

      The Washington Post stories have been proportionately against the people for a very long time. This article exposes their “Liberal Elite” opinion which is always firmly on the side of Wall Street.

      Our problem is related to BIG everything. Very few of these BIG businesses, from Monsanto to MorganChase, do us any good at all and the net result is the take over of the government and everything helpful to the people. We are better off without them because in reality BIG can never be regulated.

      Marx started out a Republican but was disappointed in America. However, his solution was BIG government. We need BIG middle class and the rest will take care of itself. To get there we must use the government to take apart the BIG private sector (including the FED) first and then we can take apart BIG government without hurting anyone.

      Taking apart government by the BIG powers is exactly the worst course for the people of our country.

      1. Cheyenne

        The problem has nothing to do with left or right, which at this point is a thoroughly discredited puppet show.

        No, WaPo’s real position is that the Divine Right of Kings should supersede the Rule of Law. That we should allow banks to shit on black letter law because Someone Big said that’s the deal.

        WaPo, like Obama and Bush, is a Wall Street minion. And anyone who believes their bullshit is a serf.

    3. Barbyrah

      Operative (Orwellian) word WaPo is using: “misconduct.”

      Yep, just a little “misconduct” going on here. Nothing more. Illegal? Naaaah. Immoral? No way! Lacking in ethics, integrity? Hey, man…this is harmless stuff. WHY are you guys making such a big deal about it, anyway?

      Yep, “misconduct.” Nothing more. Move along.

  3. Tom Key

    Where are the Wall Street prosecutions? Lehman Brothers conceals billions from duped investors, then uses bankruptcy to dupe their investors. CEO Dick Fuld paid himself a bonus of $200 million. Please, will a prosecutor put him in jail and take his houses? Please.

    Goldman Sachs put together a scheme to cheat the people who trusted them, their own investors. Not one white collar GS criminal — fraud is a crime — is in jail.

    In the 1920s, Wall Street fat cats stole millions from the economy using CDO’s, synthetics, and swaps. They were prosecuted, and legislation was passed which protected consumers and investors. The middle class expanded.

    In the 2000’s, Wall Street fat cats used the same fraudulent CDO’s. They stole trillions of dollars by removing the equity and cashing it out for themselves. Are they immune from prosecution?

    We did see The US prosecutor successfully breach the Swiss secret banking system in a 2009 prosecution against UBS, which concluded when the bank admitted to aiding tax evasion and paid a $780m fine.

    Earlier this year, the German government prosecuted the former CEO of German lender IKB Deutsche Industriebank AG. The Dusseldorf District Court slapped Stefan Ortseifen with a 100,000-euro fine as well as a ten-month suspended jail sentence for misleading investors about the bank’s share prices.

    US and European prosecutors are mining the data produced by the Swiss

    In May 2011, the Justice Department sued Deutsche Bank AG, one of the world’s 10 biggest banks by assets, for at least $1 billion. The allegations are that MortgageIT funneled risky mortgages to HUD, basically defrauding taxpayers and “repeatedly” lying to a federal agency when securing taxpayer-backed insurance for thousands of shoddy mortgages. The banks are required by HUD to annually certify that they check basic lending records, like borrower’s incomes and credit history. In failing to do so, the banks violated the HUD rules and their own standard banking guidelines. The US Attorney in Manhattan, Preet Bharara has built a prima facie case that could be wielded against almost all banks involved in shoddy lending since 2003. http://www.docstoc.com/docs/78589578/USA-vs-Deutsche-Bank

    1. citalopram

      Since the rule of law has been thrown out the window, perhaps Americans should take the law into their own hands and hunt down the perps themselves? Something tells me that street justice would be far harsher for them versus getting around the legal system with all their money and lawyers. It is almost as if the Masters of the Universe are begging us to act. It’s like they keep flaunting these grievances in our faces day by day.

      But I digress, it’s just fantasy after all. The American electorate is still waiting on their dream leader to lead the nation back to righteousness. One half wants Mussolini, and the other is waiting for FDR.

  4. ep3

    Yves, keep up your good work.

    Consider it ‘job security’.
    “But as long as the media keeps treating the Miller/Federal regulator PR as serious, yours truly will have to keep debunking it”

  5. Susan the other

    The AGs should have addressed the issue of securitization from the beginning. If it was a jurisdictionally allowed avenue for investigation, as evidenced by Nevada’s latest lawsuit against BAC, why didn’t the 50 do it? Instead they danced around it as if to pretend it wasn’t an issue of legal compliance with the securitization process,but just a “robosigning” issue. Asinine. Intentionally asinine. It is getting nowhere fast and the only way for this settlement to have any meaning is to get to the root of the problem and do it fast. Do it now. Otherwise the banks will be forced to continue robosigning. Or flick in foreclosures altogether. If they just confess they totally screwed up the securitization, all the titles can be quieted and new contracts can be negotiated. That is the only real solution.

    Also has anyone read the wikileaks from the French Embassy today re Legard, Paulson and Sarkozy in 2007? Talk about denial and coverup. Where does all the breaking news but the AG settlement talks?

    1. Mark P.

      ‘The AGs should have addressed the issue of securitization from the beginning. If it was a jurisdictionally allowed avenue for investigation … why didn’t the 50 do it?’

      Because it’s so vast: to look straight on at and grasp the extent of the criminality and problems there is to contemplate the possible end of the socioeconomic system that we know. No question of that.

      Ironically, these problems might have been confronted in 2009-2010 in the ways that Bill Black and others have described, and might then have been more tractable, so more of the system might have been salvaged on the other side. Now, when the end of the games come — strung out in stages as this process will be over the next few years — there will be less of the system that survives.

      Good, I may personally say from an ideological POV. But for the mass of average folks there will be much more suffering from the TPTB taking the extend-and-pretend for years.

  6. chris

    I received a check recently that is from a lawsuit against country wide for damages and excessive charges that occurred during a several year stretch while my loan was serviced by CW.
    big payout!
    18 dollars.

  7. Wade Riddick

    I like the fact that you’re covering the issue, but you’re missing out on the federalism angle here. The banks are only beginning to realize that their patronage didn’t extend to all the regulators they needed. The banks at issue here, when they spend money at the state level, direct it towards the Governor and Treasurer because of the bond-issuance patronage. A.G.’s get very little money from banks – and the banks are only beginning to realize this. Banks even forgot to tide things over fully in Washington and now they have to deal with the conservators at Fannie and Freddie who, unlike members of Congress and the Fed, have a fiduciary duty to sue over losses (and no campaign fund or easy avenue open for lobbying).

    The real danger with the A.G.’s is that they compete with one another and none of them want to look soft on crime. This can quickly escalate into a game of who can sue more or get a bigger settlement, like it did with big tobacco – except these banks, as you point out, aren’t nearly as well capitalized as big tobacco was. Even a small judgment could turn Wall Street into Fukushima Daiichi II.

    N.A.A.G. doesn’t really coordinate things quickly or well, given the differing state interests involved. It’s hard to know how those differences will pan out. With budgets tight, A.G.’s may not have investigative funds and will run away from it or, conversely, they may see it as a lucrative opportunity to get money for their strapped states – like with tobacco. Except that was twenty years ago and the corporate communists (Republicans, et al.) have spent the intervening twenty years destroying private property rights in a radical hijacking of the federal courts to make sure nothing like the big tobacco settlements ever happen again (see the recent AT&T Mobility case from the Supreme Court that essentially legalized small claims fraud; it seems when it comes to private property rights, some animals are more equal than others – especially the billionaires).

    You’re mistaken about the statute of limitations issue. If the banks are thinking it’s run, their rude awakening will be in electroshock territory. Each one of these states may have different securities laws with different timelines (the legal bills alone to figure this out boggle the mind). Civil fraud doesn’t prescribe in many states and each state has different foreclosure procedures and laws on how to handle them. Defects in title can require ten to thirty years to run and this governs the fraud remedies/prosecutions. These defects spread out to all sorts of different small and large entities, making the issue very hard to bury. On the title insurance front alone, you’ve got plenty of small mom and pop shops who might drag a case out in state court and make demands on local prosecutors. God help the banks if they get organized.

    While it’s true that in a state like Louisiana, the A.G. might not even have original criminal jurisdiction, he can certainly investigate and publicize anything he finds. That’s always the real problem when you go digging in a fraud this large with subpoenas. You just don’t know what’s baked in there. Sociopaths who loot organizations typically hire idiots and other sociopaths because they’ll do what they’re told. People this screwed up have usually done a lot of other bad things that float to the top in an investigation. They can be flipped. People can even lie to cover up past crimes that are beyond the statute of limitations simply because they want to avoid losing everything they’ve got in a civil suit. This generates new crimes. And people usually flip upward.

    Just imagine what’s running through the minds of all those low-paid robosigning notaries who were complicit in making the mystery meat. What would you think one guy who worked at MERS for five minutes is going to do with fifty different A.G.’s threatening civil and criminal action? (That’s fifty different lawyers for fifty different jurisdictions… and let’s not forget that, when it comes to paying legal bills and turning over internal documents, corporations have an obligation to shareholders to comply with the law and not assist criminals.)

    Now imagine all the potential members of the grand jury pool who lost pension investments or have an underwater mortgage…

    On the civil side, Attorneys General also have plenty of room. They can dig up documents through discovery and what’s a fact in one court case can migrate across the country causing 49 more headaches. The problem for banksters is that most of the banking patronage in a state A.G. race is local and the local banks compete with and have been victimized by many of these big mortgage mills/bundlers. Like the title insurance companies, they are absolutely seething at Wall Street. BoA never figured they’d have to make campaign contributions to the Hawaii A.G.’s race, but it’s beginning to look like they should have.

    And let’s not forget that other nations, like Canada, may not have nearly as mercenary a legal system waiting on the banks’ interests hand and foot. Even if this goes nowhere in the U.S., it could be kicking around everywhere else for quite a while.

    I don’t know where you go to find a can for worms this size…

  8. steelhead23

    Yves, I merely wish to point out that it is NOT uncommon for a lead negotiator to put forward a term sheet that not all parties on that side support. Typically, this happens when power is not equally distributed – the weaker players get rolled. I suspect Tom is anxious to get something, anything out of the effort to enhance his political star power, while delay works to the advantage of the banks. Indeed, isn’t it true that there is an invisible player at the table – a clock? As time goes on, the banks’ hand gets stronger as eventually, the statute of limitations is invoked. So, were I working for the banks in this game, I would put forward complex proposals that the other side would have to carefully review, then respond, which I then review and respond, while my friend, Mr. Clock, just keeps on running.

    Soon, the stronger players among the AGs will have to run away, complete their investigations, and file complaints. Time is not their friend, and they damned well ought to figure out they’re being played for chumps. Are you listening Mr. Coumo?

    1. Foppe

      Yves, I merely wish to point out that it is NOT uncommon for a lead negotiator to put forward a term sheet that not all parties on that side support.

      You still assume he is in any way sincere. Yet your story cannot explain at all why Miller says that he is investigating the banks when he has done no such thing. So, sorry, but talk about “statutes of limitations” is a red herring. If you want to scare the banks, then you need clout. Or, in other words, you need to investigate and ‘leak’ information about a few of the more horrendous cases (which there are hundreds of), and their stocks will tank. This is precisely the reverse of what is actually happening.

    2. Yves Smith Post author

      There are reasons the “not everyone agrees” negotiating logic is not valid:

      1. That can be viable only when the parties are not capable of independent action, or unlikely to go that route. Here, that is true only of the weakest. The dissenters include the strongest. You might see this in a labor setting, where multiple unions are represented at a plant, and the biggest union takes the lead. Unless one of the smaller unions is willing to strike and can shut the mill, it gets rolled.

      Those dynamics just don’t apply here, that’s why I ignored them.

      2. There is plenty of evidence (see earlier posts) that Miller hasn’t even gone through the motions of trying to do a #1 strategy. The best way to persuade people who have power to give up their power is to be super solicitous, pretend to hear and consider their objections, and give them token concessions and serious-sounding rationalies as to why you can’t go as far as they want.

      By contrast, Miller is pretty clearly working fist in glove with the Feds, and acting as if he can simply roll the states. He is incompetent and/or believes that what is best for the banks is best for the US, and the other AGs will come around to his point of view.

  9. Martskers

    What happens to the banks’ liability to individual
    city/county/state government offices who lost BILLIONS because mortgage transfers were not properly
    recorded, and the registration fees not paid? Would
    the “release” the banks are trying to get include
    this liability? I don’t see how it could.

    I’ve heard estimates in the billions for this
    liability, and I understand lawsuits have been
    filed over this, including one in Tennessee, a
    so-called “qui tam” suit that sought to enforce
    the payment of registration fees by the banks
    who failed to do so.

  10. To Tell The Truth

    Banks said to balk at ‘robo-signing’ offer
    NEW YORK – Sept. 6, 2011 – U.S. banks are balking at an offer by state officials to limit their blame for alleged improper mortgage practices in return for a multibillion-dollar payment.

    Mortgage giants Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. say the latest attorneys general proposal over so-called robo-signing and other sloppy mortgage practices is a “non-starter” because it does not release the banks from all future liability for past mortgage practices and mortgage-backed securities they sold to investors, people with direct knowledge of the discussions told the Financial Times.

    Robo-signing involves employees signing foreclosure documents en masse without reviewing them, as required by law. The documents are used to prove banks have a right to foreclose if a homeowner isn’t making mortgage payments.

    The banks alleged they were so overwhelmed with paperwork that they cut corners.

    The scandal led the five big lenders in negotiations with attorneys general to temporarily halt foreclosures nationwide last fall.

    The banks’ all-encompassing immunity demand comes as some attorneys general express concern the negotiations, involving a proposed total $20 billion to $25 billion penalty payment, already offer the banks far too broad a release from liability, the Financial Times said.

    The talks, which resume this week, include discussions about releasing the banks from legal liability for wrongful securitization practices.

    Securitization involves pooling unrelated residential and commercial mortgages, and sometimes adding pooled auto loans and credit-card debt, and selling the debt as bonds and other securities to investors. The practice produced billions of dollars of profits for banks but eventual investor losses in the tens of billions.

    The attorneys general of New York, Delaware, Massachusetts and Nevada are probing such securitization matters and have told the 46 other states in the talks they don’t agree with this part of the proposal, the newspaper said.

    They say the proposal seeks to resolve allegations that have not been fully investigated, the newspaper said.

    Other state officials counter that cleaning the slate with banks can heal the deteriorating housing market and secure fresh debt relief for distressed homeowners.

    Copyright © 2011 United Press International

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