by Michael Gecan and Ari Graf for The New York Daily News
April 18, 2012
Three months ago, in his State of the Union speech, President Obama announced a new task force to investigate mortgage fraud and bring some measure of relief to the 12 million American families who are either losing their homes or in danger of losing them.
The new Residential Mortgage-Backed Securities Working Group would be co-chaired by New York State Attorney General Eric Schneiderman, U.S. Attorney John Walsh of Colorado and three Washington insiders from the Justice Department and the Securities and Exchange Commission.
Whether or not the President, attorney general and others intend to get around to this task someday, "speed" was a terrible word to choose. Because 85 days after that speech, there is no sign of any activity.
The new working group was so prominently featured because of relentless pressure that Schneiderman and others — including the Metro Industrial Areas Foundation we lead — had exerted in the weeks leading up to the speech. Our position was that a $25 billion settlement with the big banks being pushed by the administration was just 10% of what was needed to repair the damage done to homeowners and communities by predatory banking practices.
Just a day before the State of the Union, an attempt by the administration to rally most of the nation's other attorneys general to support the feds' settlement with the banks had fallen flat. Schneiderman and his allies pledged to hold out until the administration agreed the settlement would not release the banks from further liability.
The ballyhooed working group was supposed to be the vehicle for continued scrutiny and pressure on the banks. To leave no doubt about the symbolism, Schneiderman was in the State of the Union gallery, seated right behind the First Lady.
But very, very little has happened since.
Yes, for a few days, there seemed to be a renewed sense of purpose and focus from the administration. U.S. Attorney General Eric Holder held his own news conference and announced that at least 55 Justice Department lawyers, agents, analysts and investigators would be assigned to the effort. A news release promised 30 staffers would be joining efforts "in the coming weeks."
Housing and Urban Development Secretary Shaun Donovan appeared on a morning talk show and described the administration's actions as "a coup."
Schneiderman, who had expended so much energy and political capital leading up to the State of the Union, appeared on MSNBC and said the settlement was just an opening phase and that "everything was still on the table." On Feb. 9, what Schneiderman described as this first "narrow settlement" was unveiled by all parties.
On March 9 — 45 days after the speech and 30 days after the announcement — we met with Schneiderman in New York City and asked him for an update. He had just returned from Washington, where he had been personally looking for office space. As of that date, he had no office, no phones, no staff and no executive director. None of the 55 staff members promised by Holder had materialized. On April 2, we bumped into Schneiderman on a train leaving Washington for New York and learned that the situation was the same.
Tuesday, calls to the Justice Department's switchboard requesting to be connected with the working group produced the answer, "I really don't know where to send you." After being transferred to the attorney general's office and asking for a phone number for the working group, the answer was, "I'm not aware of one."
The promises of the President have led to little or no concrete action.
In fact, the new Residential Mortgage-Backed Securities Working Group was the sixth such entity formed since the start of the financial crisis in 2009. The grand total of staff working for all of the previous five groups was one, according to a surprised Schneiderman. In Washington, where staffs grow like cherry blossoms, this is a remarkable occurrence.
We are led to conclude that Donovan was right. The settlement and working group — taken together — were a coup: a public relations coup for the White House and the banks. The media hailed the resolution for a few days and then turned their attention to other topics and controversies.
But for 12 million American homeowners, collectively $700 billion under water, this was just another in a long series of sham transactions.
Schneiderman, who has acted boldly and honorably, should distance himself from this cynical arrangement. He should resign and go back to working effectively with fellow attorneys general in Delaware, Massachusetts and Nevada.
They are much more likely to create the kind of culture of accountability in the financial community that will protect U.S. families from the next real estate scam.