We were early to warn readers that Iowa Attorney General Tom Miller, who is heading the 50 state probe into mortgage abuses, was unlikely to take as tough a stand with banks as his early sabre-rattling suggested.
Now other close observers of the 50 state AG probe, like Marcy Wheeler of FireDogLake, have pointed out that expectations for this group were probably too high, given that some of the AGs had been opposed to the effort before, and they’d hobble the effort from the inside. But even though true, that observation still gives Miller more of an out than he deserves.
The fact is that Miller had decided, before any investigation was undertaken, that his group was not going to take any action that might allow investors to recover for losses. Why? Some of the parties in a position to recover would not be Americans. This came by e-mail before the December meeting at which Miller promised to “put people in jail” as well as obtain deep principal mods and compensation for defrauded homeowners:
The homeowners off to meet Tom Miller is a setup for a photo-op to imply buy-in. I was w/ a European documentary maker this weekend who spoke to Miller a few days ago and said Miller relayed the fraud isn’t so bad, everything will be worked out .. the standard line; he’s already made up his mind. He doesn’t want those European governments demanding their money back. The meeting is a photo-op setup because the too-big-to-fail crowd is scared of put-back liability and shorts; they’re working hard to make it appear they’re doing something to quiet everybody down.
So get this: so keen is a state attorney general to protect the wallets of big banks that he’s decided there wasn’t much fraud before doing any serious forensics. And his reason was to deny payouts to investors because they are foreign (China, are you taking notes?). But to prevent that outcome, he also has to throw US investors and wronged homeowners under the bus.
Welcome to equal protection under the law, circa 2011. No wonder gun sales are skyrocketing.
Thus Miller’s retreat is entirely predictable, and we can plot its trajectory. Following his “get tough with crime” mid-December declaration, Miller took criminal investigations off the table on January 4. From Bloomberg:
The five largest loan servicers, including Bank of America Corp. and JPMorgan Chase & Co., may be the first to settle with the 50 state attorneys general probing foreclosure practices, Iowa Attorney General Tom Miller said…..The group isn’t pursuing a criminal investigation, Miller said. “Our focus is to reform the servicing process and that’s inherently civil, not criminal,” he said.
One of our readers, who is a seasoned litigator, disagreed vehemently with Miller’s “this can only be a civil investigation” and provided examples of criminal prosecutions for analogous misconduct.
The latest step backwards by Miller is a softening in his stance and a refusal to reaffirm his earlier commitments. From Iowa CCI’s press release about its meeting yesterday with Miller:
Following their December 14th meeting with Iowa Attorney General Tom Miller, who is leading the 50-state investigation of the “foreclosure-gate” scandal, 200 members of Iowa CCI met with him again on Tuesday to continue the push for a settlement that will help millions of Americans stay in their homes. Iowa CCI is part of a coalition of community groups across the country fighting to end the foreclosure crisis.
“Tuesday’s meeting felt a lot different than the meeting in December,” said Iowa CCI Director Hugh Espey, “In our first meeting with Attorney General Miller we felt like we had a champion that was ready to go toe to toe with the big banks. We left this meeting wondering if the big banks had knocked the wind out of our state’s top law enforcer.”
“In many cases a loan modification is in everybody’s best interest – the homeowner, the investor, servicer and the national economy,” Miller had said in a statement following the December meeting. “… I know it’s worth our best efforts to save as many homes as we can.”
In Tuesday’s meeting The Attorney General was less forthcoming about the intended outcome of the settlement. He did not repeat previous commitments to aim for a settlement that would keep people in their homes, nor to press criminal charges against bank officials where evidence of fraud and criminal wrongdoing is found. The Financial Crisis Commission has recently referred several cases to the states for further criminal investigation.
As more aggressive AGs, like the ones in Arizona and Nevada, file suits against banks, perhaps their complacent peers like Miller will be embarrassed into acting. But until then, this “see no evil, hear no evil, speak no evil” by top enforcement officials appears likely to remain the norm.
A
coalition of seven major public pension systems, led by New York City
Comptroller John Liu, has asked the boards of four of the largest U.S.
banks to examine their mortgage and foreclosure practices.
In
a letter dated January 6, the pension fund coalition urged the Audit
Committees of Bank of America Corp, Citigroup Inc, JPMorgan Chase &
Co, and Wells Fargo L& Co to launch independent examinations of their loan modification, foreclosure, and securitization policies and procedures.
"This
will help to prevent future compliance failures and restore the
confidence of shareholders, regulators, legislators and mortgage
markets participants," the coalition said in the letter.
Bank representatives could not be reached for immediate comment on Sunday.
On
January 7, in a decision that could slow foreclosures nationwide,
Massachusetts' highest court voided the seizure of two homes by Wells
Fargo & Co and US Bancorp after the banks failed to show they held
the mortgages at the time they foreclosed.
That
sent fears through the market as investors worried that decision could
threaten lenders' ability to work through hundreds of thousands of
pending foreclosures.
The
Supreme Judicial Court of Massachusetts' unanimous decision upheld a
lower court ruling and was among the earliest cases to address the
validity of foreclosures done without proper documentation.
That
issue, including the use of "robo-signers" who approved foreclosure
documents without reviewing them, last year prompted an uproar that led
lenders such as Bank of America, JPMorgan Chase and Ally Financial Inc
to temporarily stop seizing homes.
Courts
in other U.S. states are considering similar cases, and all 50 state
attorneys general are examining whether lenders are forcing people out
of their homes improperly.
The
pension fund coalition represents more than $430 billion in pension
fund investments, including $5.7 billion invested in the four banks.
Liu
represents the five NYC pension funds. The coalition also includes the
Connecticut Retirement Plans and Trust Funds, the Illinois State Board
of Investment, the Illinois State Universities Retirement System, the
New York State Common Retirement Fund, the North Carolina Retirement
Systems, and the Oregon Public Employees Retirement Fund.
The
coalition called for the banks to report the findings of their
independent examinations in their 2011 proxy statements this spring.
At
the end of the last year, the coalition's combined holdings in each
bank included: 97.1 million Bank of America shares valued at $1.3
billion; 226.6 million Citigroup shares valued at $1.1 billion; 40.7
million JPMorgan Chase shares valued at $1.7 billion, and 50.6 million
Wells Fargo shares at $1.6 billion.
It's about
time public pension funds get involved and use their clout to pressure
banks to examine their loan modification, foreclosure, and
securitization policies and procedures. I'm not sure anything will come
out of this but the foreclosure crisis has sounded the alarm bell and
banks need to respond to make sure that measures are in place to prevent
this type of abuse from ever happening again.
Finally, I leave you with some thoughts from Graham Turner of GFC Economics, one of the best independent economic consultancy shops for institutional clients:
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Shocking details have been released regarding the incident involving CBS News Chief Foreign Correspondent Lara Logan during the protests in Egypt. CBS News issued a statement Tuesday revealing that Logan is currentl in the.
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CBS News announced Tuesday that correspondent Lara Logan — who was on location in Egypt covering the protests against now former President Hosni Mubara...
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Shocking details have been released regarding the incident involving CBS News Chief Foreign Correspondent Lara Logan during the protests in Egypt. CBS News issued a statement Tuesday revealing that Logan is currentl in the.
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CBS News announced Tuesday that correspondent Lara Logan — who was on location in Egypt covering the protests against now former President Hosni Mubara...
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Shocking details have been released regarding the incident involving CBS News Chief Foreign Correspondent Lara Logan during the protests in Egypt. CBS News issued a statement Tuesday revealing that Logan is currentl in the.
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CBS News announced Tuesday that correspondent Lara Logan — who was on location in Egypt covering the protests against now former President Hosni Mubara...
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Shocking details have been released regarding the incident involving CBS News Chief Foreign Correspondent Lara Logan during the protests in Egypt. CBS News issued a statement Tuesday revealing that Logan is currentl in the.
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CBS News announced Tuesday that correspondent Lara Logan — who was on location in Egypt covering the protests against now former President Hosni Mubara...
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Shocking details have been released regarding the incident involving CBS News Chief Foreign Correspondent Lara Logan during the protests in Egypt. CBS News issued a statement Tuesday revealing that Logan is currentl in the.
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CBS News announced Tuesday that correspondent Lara Logan — who was on location in Egypt covering the protests against now former President Hosni Mubara...
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Shocking details have been released regarding the incident involving CBS News Chief Foreign Correspondent Lara Logan during the protests in Egypt. CBS News issued a statement Tuesday revealing that Logan is currentl in the.
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CBS News announced Tuesday that correspondent Lara Logan — who was on location in Egypt covering the protests against now former President Hosni Mubara...
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Shocking details have been released regarding the incident involving CBS News Chief Foreign Correspondent Lara Logan during the protests in Egypt. CBS News issued a statement Tuesday revealing that Logan is currentl in the.
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CBS News announced Tuesday that correspondent Lara Logan — who was on location in Egypt covering the protests against now former President Hosni Mubara...
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Shocking details have been released regarding the incident involving CBS News Chief Foreign Correspondent Lara Logan during the protests in Egypt. CBS News issued a statement Tuesday revealing that Logan is currentl in the.
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CBS News announced Tuesday that correspondent Lara Logan — who was on location in Egypt covering the protests against now former President Hosni Mubara...
