How Liberals are Getting Spun in the Mortgage Settlement Debate
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The Obama administration’s record of prosecuting elite financial frauds is worse than the Bush administration’s record, which is a very large statement. This fact is demonstrated by a November report by Syracuse University’s Transitional Records Access Clearinghouse (TRAC), “ Criminal Prosecutions for Financial Institution Fraud Continue to Fall.” The truth is that neither administration has prosecuted any elite CEO for the epidemic of mortgage fraud that drove the ongoing crisis, in contrast to over 1,000 elite felony convictions arising from the Saving & Loan debacle in the 1980s. Yet today's ongoing crisis caused losses more than 70 times greater than the S&L debacle, and the amount of elite fraud driving this crisis is also vastly greater. Bank CEOs leading what I call "accounting control frauds” now do so with impunity. They become wealthy through fraud, and even if they are sued civilly they almost invariably walk away wealthy with the proceeds.
The Obama Administration Prefers Politics and Propaganda to Prosecutions
Elite financial institutions officers engaged in fraud face a dramatically reduced risk of prosecution compared to 20 years ago when financial fraud was far less common. TRAC reports that the number of financial institution fraud prosecutions under Obama is less than one-half the number 20 years ago. Bush (II) was slightly better than Obama in prosecuting non-elite financial institution frauds, but both were pathetically bad.
The New York Times reported on January 23 that the administration rushed to try to reach a settlement with the five largest banks that engaged in massive foreclosure fraud so that it could take credit for it in the State of the Union (SOTU) address. The headline was “Political Push Moves a Deal on Mortgages Inches Closer.” The administration did not deny the statements made in the article, which stated:
“But a final agreement remained out of reach Monday despite political pressure from the White House, which had been trying to have a deal in hand that President Obama could highlight in his State of the Union address Tuesday night.
The housing secretary, Shaun Donovan, met on Monday in Chicago with Democratic attorneys general to iron out the remaining details and to persuade holdouts to agree with any eventual deal. He later held a conference call with Republican attorneys general. But as he renewed his efforts, Democrats in Congress, advocacy groups like MoveOn.org and several crucial attorneys general said the deal might be too lenient on the banks.
In a bid to win support from California officials, Mr. Donovan proposed earmarking $8 billion in aid for beleaguered California homeowners, but that left other state attorneys general incensed, according to an official familiar with the negotiations.”
Though the NYT did not mention it, the facts in the article represent multiple disgraces on the administration’s part that go beyond the substance of deal. First, there is the obvious impropriety of pressuring state attorney generals (AGs) who are Democrats to approve a deal so that the President can claim credit for it in the SOTU. Second, it is disgraceful that HUD Secretary Donovan met separately with Democratic AGs. Prosecutions and suits against banks must have nothing to do with political affiliation. Holding separate meetings with AGs based on their party affiliation brings the entire system into disrepute. Third, the idea of offering California a unique earmark in order to buy AG Harris’ support for a deal is as stupid as it was offensive.
The administration, it seems, thinks that everything is about politics. As a former Department of Justice attorney, I regret the administration’s bringing the department into disgrace. I can personally assure the nation that nothing like this ever occurred during the S&L debacle in our prosecutions, civil lawsuits, and agency enforcement actions.