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WSWS | The Obama administration has intervened to support a settlement by banks charged with fraudulent practices in the processing of home foreclosures that would prevent state governments, New York in particular, from carrying out their own investigations of major Wall Street firms.
The New York Times reported Monday that Shaun Donovan, the US secretary of housing and urban development, together with high-ranking Justice Department personnel, has been “waging an intensifying campaign” to persuade Eric T. Schneiderman, the New York attorney general, to drop his opposition to a settlement of the home foreclosure charges.
Under the proposed settlement, major banks including JP Morgan Chase, Wells Fargo, Citigroup and Bank of America, would pay a combined total of $20 billion, which would supposedly go toward home loan modifications and homeowner counseling. In return, bank executives would be shielded from possible civil suits or criminal prosecutions arising from state probes into their role in fueling the sub-prime mortgage bubble, whose collapse triggered the financial meltdown of September 2008.
Schneiderman’s office has opened several inquiries into banking practices during the mortgage boom of the mid-2000s.
Last year it emerged that banks and mortgage companies forged documents and paid employees with no knowledge of the homes in question to sign legal documents that were then used to process foreclosures.
The amount of the settlement of charges arising from these practices—$20 billion—represents a financial wrist-slap for banks that made multiples of this figure from the creation and sale of securities linked to toxic home loans. These banks have continued to reap huge profits from speculative bets in the midst of a global economic crisis of their own making that has destroyed the jobs and living standards of countless millions in the US and around the world. Nevertheless, the banks have resisted paying even this token sum.
$20 billion will barely make a dent in a foreclosure crisis that has already thrown millions of Americans out of their homes. US homeowners collectively owe the banks $753 billion more than the market value of their homes.
Schneiderman has based his opposition to the deal on provisions barring future litigation against the banks. The Times quoted Danny Kanner, a spokesman for Schneiderman, as saying, “The attorney general remains concerned by any attempt at a global settlement that would shut down ongoing investigations of wrongdoing related to the mortgage crisis.”
Schneiderman is only the most prominent of several state attorneys general, including Catherine Cortez Masto of Nevada and Beau Biden of Delaware, who have refused to support the proposed settlement.
In pressuring Schneiderman to drop his opposition to the deal, the Obama administration claims to be motivated by a desire for a quick resolution that would funnel $20 billion in aid to hard-pressed homeowners. “Our view is we have the immediate opportunity to help a huge number of borrowers to stay in their homes, to help their neighborhoods and the housing market,” Donovan told the Times.
A spokeswoman for the Justice Department echoed this line, telling the newspaper, “The Justice Department, along with our federal agency partners and state attorneys general, are committed to... bring relief swiftly because homeowners continue to suffer more each day that these issues are not resolved.”
