News & Politics

Attacks on NY AG Standing Up for Main Street Show Wall Street's Control Over Our Elites

Attacks on New York's attorney general Eric Schneiderman expose the destructive thinking of our financial and political elites.

The following article first appeared at Working In These Times, the labor blog of In These Times magazine. For more news and analysis like this, sign up to receive In These Timesweekly updates.

"Corporations are people, my friend,” Mitt Romney recently declared.

That was pretty clumsy coming from a mega-millionaire Republican candidate, as he was backing the 2010 U.S. Supreme Court decision Citizens United opposed by no less than 80 percent of the public because of the enormous political power it confers upon the rich.

But how about the notion that “Wall Street is our Main Street,” which was voiced by Federal Reserve official Kathryn Wylde? Her assertion was especially startling because her explicit duty is "to represent the public” in determining how to handle the massive wrongdoing of major banks in ramming through home foreclosures.

However, Wylde was merely being honest about the aims of federal policy. The idea that “Wall Street is Main Street” and its protection was the uppermost goal in the mind of top Treasury Department officials. The plight of working families on the verge of losing their homes—well, that was somehow a much, much lower priority.

The major banks—Bank of America, Citigroup, JPMorgan Chase and Wells Fargo—are facing legal pressure from the attorneys general of all 50 states over their practices, including “robo-signing.

With the ownership of mortgages spread among thousands of investors due to securities designed to minimize the risk, it becomes hopelessly complex to prove ownership of a home when a bank wants to foreclose, as Chris Hayes of The Nation explained on MSNBC Wednesday night.

But no sweat! Presto—the banks came up with reams of bogus documents and then hired employees whose job was to sign affidavits saying that yes, indeed, Bank of America owned the home in question. Untold thousands of families were thus illegally evicted.

These unlawful practices brought together the 50 attorneys general who demanded—no, not time in jail for bank CEOs—$20 billion in fines that would be devoted to mortgage modifications. In exchange, the bankers would get total immunity from prosecution.

When New York Attorney General Eric Schneiderman—who this week was dismissed from the executive committee of the 50-state AG investigation—balked at accepting the deal, Wylde, the public’s watchdog, told him,

It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.

Wylde’s concern for the banks—already the recipients of taxpayers’ generous 2008 TARP bailout package—has been matched throughout the past two and a half years of Obama administration programs designed to help homeowners.

The programs were supposed to help desperate working families faced with rising interest rates and falling home values to stay in their homes.

Recent reports and articles on foreclosures should assure Wylde that the bankers have been treated with kid gloves from day one of the mortgage-relief programs. First, the Obama Administration apparently ruled out the idea of prosecuting bank officials for their multiple offenses, as Mary Bottari of Bankster USA points out:

Perverse incentives on Wall Street allowed top executives to make more money on flawed loans than boring old 30-year mortgages.

Even though there is widespread agreement that Wall Street’s endless appetite for high-interest, high-fees loans to fuel the mortgage securitization machine had a causal role in supercharging the housing bubble, not one mortgage servicer provider or big bank CEO has been put in jail. This compares to over 1,000 successful prosecutions of top officers during the Savings and Loan crisis of the late 1980s.

The almost uniform judgment of government officials outside Treasury Secretary Timothy Geithner is that the homeowner assistance programs have been a disaster. Former Senator Ted Kaufman of Delaware said: "We have a $700 billion program that basically helped all the banks but really hasn’t done a whole lot for people who in the process of losing their homes.”

Elizabeth Warren, the consumer advocate who inspires fear and loathing among Republicans, "grilled" Geithner at a June hearing in Washington D.C. for shaping the programs around the needs of banks and other financial institutions rather than homeowners, the New York Times reported:

"Forgive me, Mr. Secretary, but you say we designed the program from the beginning, in effect you’re saying, not to save everyone,” she said. “You designed it around servicers who, I wrote it down when you said it, ‘servicers have done a terrible job.’

"We only have three months left, with hundreds of thousands of families facing foreclosure,” she continued. “Is it time to rethink whether or not a mortgage foreclosure prevention program that is based on a group of servicers whom you describe as having done a terrible job, is a program that perhaps should be redesigned?"

Particularly tragic is that these programs were proposed at a moment when the public was ready for truly innovative action to help families on the verge of losing their homes.

With the antiforeclosure programs failing so badly, the nation is in no condition to cope with a housing picture that is, if anything, worsening, according to economist Jack Rasmus.

Foreclosures now approach 10 million, with some sources predicting 13-14 million before the current housing cycle bottoms. That’s about one-fourth of all mortgages in the U.S. The numbers for homes in negative equity are even greater, at around 16 million.