Kiss Me I’m a Banker! WH Lobbies NY AG for Banks

Banks have a new image. Now you have ‘a friend,’ your friendly banker. If the banks are so friendly, how come they chain down the pens?

-Alan King

Don’t blame me, the bumper sticker goes, I bank locally. Even better, I bank at a credit union, a credit union with a funny name. It wasn’t responsible for bringing the financial sector to its knees like some banks (cough, cough Bank of America). My bank was even solid during the savings & loan crisis of the late 1980s. There are probably a few people making a good living at my bank, but I’m sure they aren’t raking it in like Robert Rubin or some of those guys advising the President.

I can see how banks don’t want to settle with all the states for improperly foreclosing on houses. I mean they are there to make a profit, right? Attorneys General can be a real pain in the neck for them. AG’s operate at the state level where you can still get things done.

Maybe there’s a good reason the Obama Administration is pandering to the bankers.  Maybe he needs their money for re-election. I don’t know, but it’s kind of dispiriting to read this in the The New York Times:

Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices, according to people briefed on discussions about the deal.

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks.

Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.

But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation.

If you read his Wikipedia bio, Schneiderman seems like a pretty consumer-friendly guy. Kind of Elizabeth Warrenesque. So why is the White House giving him a hard time? It was Treasury Secretary Tim Geithner and Larry Summers love bankers and those who love them. It was they who persuaded Chris Dodd to include the loophole in TARP legislation that allowed AIG execs to collect big bonuses.

Gene Sperling, currently a counselor to Geithner,

was a principal negotiator with then-Treasury Secretary Lawrence Summers of the Financial Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act. Gramm-Leach-Bliley repealed large portions of the depression-era Glass-Stegall Act allowing banks, securities firms and insurance companies to merge.

Economists from  Robert Ekelund and Mark Thornton to Joseph Stiglitz and Paul Krugman blame the repeal of the post-Depression Glass-Steagall act for the financial meltdown of 2007.

I can’t believe this won’t be used effectively against Obama in the election.


6 Comments . Leave a comment below.
  1. definitely dispiriting

    Obama can’t blame his behavior on a recalcitrant Congress this time. He’s doing all this arm-twisting on his own. His apologists who say it’s not like him to get tough are wrong. He can indeed get tough – when siding with the banks against someone intent on investigating their role in the 2008 financial crisis.

    I don’t see how this can be other than a big deal. We’re talking about an investigation into exactly what the banks did to bring the economy to the brink of collapse. We’re talking about what is probably massive fraud committed against the public at large and many unfortunate former homeowners in particular.

    Glenn Greenwald quotes the same NY Times article here and provides valuable references to additional commentary. Namely, Marcy Wheeler refutes the DOJ’s argument that the settlement is necessary to help people whose homes are in foreclosure.

    From Wheeler’s article:

    You see, the Administration has an “immediate opportunity to help a huge number of borrowers stay in their homes,” without any action from Eric Schneiderman. They have a way to do so more swiftly, in such a way the servicers actually would be held accountable. It would involve offering refis with principal reductions to all the underwater homeowners whose loans are owned by Fannie and Freddie. That would not only help a huge number of borrowers stay in their home, but it would be massive stimulus.

    But instead they’re sending Donovan to pressure Schneiderman to pursue a measure that would benefit far fewer homeowners and probably take more time, while putting the last nail in the coffin of the rule of law in this country.

    Greenwald quotes and recommends an article by Yves Smith here. Excerpts from Smith’s article:

    Schneiderman is far from the only person to see what a sellout this “settlement” is. The basic premise of a settlement is to obtain some sort of restitution to induce a prosecutor/plaintiff to drop a current or likely lawsuit. For the aggrieved party to get a good settlement, it needs to have a credible case, as in facts (a smoking gun or two) and a legal theory as to why those facts mean the perp is in hot water.

    Aside from robosigning, which was all over the funny papers last year, the Administration and the AGs have made sure they have no facts. [...]

    And that is why at least some of the AGs are so uncomfortable with what is going on. Even though Gretchen Morgenson of the New York Times focuses tonight on the Administration’s efforts to leash and collar Schneiderman, he isn’t alone in having significant reservations. Beau Biden of Delaware is also making a broad-ranging investigation, which is inconsistent with entering into a settlement. Martha Coakley of Massachusetts and Catherine Masto of Nevada also have initiatives underway that are at odds with a settlement, and neither one looks interested in reversing course. We’ve also been told the Colorado AG may opt out of the deal.

    Let’s hope the AGs stick to their guns. I plan to phone Martha Coakley’s office to express my support for a full investigation.

  2. Are we too many parasites feeding on too little host?

    Has the appetite for the public purse grown to a point where it is only a matter of time before the feeding is unsustainable? Those that support the feeding do themselves no favors. In a social collapse they may well be looking for a warm place over the subway grating with the rest of us. In times of desperation are not friendships in short supply?

    Settlement of the enormous bank fraud in mortgages will only spark new frauds under the “crime does pay if you can buy the law” rule. The Obama administration seems to have continued previous administration policy of putting people in DJ that have no interest in justice.

    {sotto voce}

    “The accomplice to the crime of corruption is frequently our own indifference.” –Bess Myerson

  3. Crime pays.

    Banks win.

    “In America, banks rob you.” –Anonymous

  4. "Who the @#$% else ya gonna vote for, chump?"

    Obama figures that as long as he stays an inch to the left of Republicans, and keeps his banker contribution cash lifeline intact, he’s assured of a second term. He may be right, too.

  5. From "Hope and Change" to "The devil you know is better than the devil you don't know."

    Oh, what we’ve become…

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Tue 25 Apr 12:55 AM