Broadly speaking, Washington appears to be in collusion with Big Finance, leaving the two of them in collision with The People. But collusion with the super-rich may be going out of favor…”maybe.”
As the evidence that the 50 state attorneys general pressuring the big banks are moving toward cutting a very pro-bank deal, some of the more courageous and patriotic attorneys are staking out independent positions, wherein may lie the best hopes of society for holding Big Finance responsible for the financial crisis that it, in close cooperation with government regulators and Congress and the White House and the semi-governmental Fannie Mae, brought us. One of the most recent examples is an Oct. 5 statement by Massachusetts Attorney General Martha Coakley:
I have lost confidence that the banks will bring to the table an agreement that properly holds them accountable for wrongful foreclosures….Because our office for some time has anticipated that result, we have begun preparing for litigation. [New York Post 10/6/11.]
2. Federal suit against Allied Home Mortgage
[the Government sued] Allied Home Mortgage Corporation; its founder, Jim Hodge; and Jeanne Stell, the company’s executive vice president and director of compliance….The lawsuit said the default rate climbed to “a staggering 55 percent” in 2006 and 2007, at the height of the housing boom, when the government paid $170 million to settle Allied’s failed loans. It said an additional 2,509 loans are now in default and that HUD could face $363 million more in claims.
Allied, based in Houston, operated 600 or more branches at once but only maintained two quality control employees in its corporate office, requiring branch managers to assume financial responsibility for their branches, the lawsuit said.
“Allied thus operated its branches like franchises, collecting revenue while the branches were profitable, then closing them without notice when they were not, leaving the branch managers liable for the branch’s financial obligations,” the lawsuit said.
The government said Allied had failed to impose its internal quality control plan, “effectively allowing its shadow branches to operate independently of any scrutiny whatsoever,” the lawsuit said. [New York Times 11/1/11.]
Question: Will they settle out of court and let the bad guys get away?
The Federal Housing Finance Agency is suing 17 major banks for “selling Fannie Mae and Freddie Mac $200 billion worth of sub-par mortgage-backed securities.” [Law.com 10/24/11.] The parties are currently under the judge’s guidance to organize the mammoth suit.
Question 1: Will the semi-government officials who were running Fannie Mae and Freddie Mac at the time also be tried for their role in this fraud?
Question 2: Why were some big banks that seem obvious candidates omitted from the suit?
Suggestive evidence perhaps, but not much substance yet. Exactly which politicians are defending the banks and which are defending the people is very difficult to determine. Watch for deals, convictions, individual penalties, relationship between fines assessed and the profits derived from the original frauds.