A new Bloomberg News report details awful abuse at Bank of America’s “Office of the CEO and President.” While this is just the latest in a very long litany of financial sector abuses around the mortgage crisis, it is a good opportunity to hammer home the point that Democrats generally, and President Obama in particular, still have many tools at their disposal to restrain the increasingly lawless financial sector.
For those who want to see the new “economic justice wing” of the Democratic Party gain in strength, this is a perfect issue to keep front and center.
If you’ve kept even half an ear open to stuff that David Dayen has been writing since 2009, this the Bloomberg piece will not be terribly surprising. The broad stuff is the same as usual: under terms of the HAMP program and various bailout packages, banks were supposed to help distressed homeowners in certain ways. Instead, they used the opportunity to squeeze homeowners, stuff in as many frivolous fees as possible, and then foreclose anyway, often illegally. This time, it’s the same story from the same period, but apparently reaching all the way up to the CEO’s office. Though I hadn’t heard of this one before:
At the office in Broomfield, Urban Lending employees examined every letter from lawmakers to determine which were computer-generated and which were signed by a human, according to four former employees. The handwritten ones got special attention and were called wet signatures, they said. The others were referred to as dry. The signatures of some U.S. senators, including Democrats Harry Reid of Nevada, Carl Levin of Michigan and Charles Schumer of New York, were enlarged to two to three feet and tacked on the walls of a quality-control room to help employees identify wet signatures, the people said.
As always, the basic problem is the same: financial institutions have been behaving in flagrantly illegal ways (eg, laundering money for criminals). This has been doubly toxic in the case of mortgages, because of the considerable size of the aggregate toxic effects of millions of homeowners suffering terrible financial damage. In his first term, Obama showed little willingness to stop what amounted to systemic fraud around the mortgage industry. Huge settlements (which often turned out to be much smaller than the headline number) have repeatedly failed to stop abuses, and the individual people ever punished are small-timers at best.
That has turned around somewhat, with the sheer scale of fines and lawyer fees pushing JP Morgan Chase into a quarter of unprofitability, for example. But there is still very far to go to restore a healthy financial sector which isn’t prone to abuse.
There are various structural reforms which could be made to the mortgage service industry, but the power Democrats should concentrate on first is enforcement. No president completely controls the regulatory bureaucracy, of course. But with the filibuster on nominations de-fanged, until at least 2015 new heads of agencies can be confirmed quickly. That means Obama should not hesitate to demand a strict attitude towards the banks, especially one with the goal of claiming a few high-profile convictions, to drive the point home that being very wealthy or important is no get-out-of-jail-free card. That, in my view, is a necessary condition for halting financial sector abuse.
This all depends on the preferences of Democrats, of course. But the exploding popularity of Elizabeth Warren, and the deep unpopularity of the financial sector, ought to put a little steel in the Democratic spine. This would be a winning issue, if only the party would pick it up and run with it.