Prosecutors Take it Easy on Wall Street
In the fall of 2010, after years of tireless work by foreclosure defense attorneys and citizen activists, the media finally shed light on what is widely known as robosigning. Robosigning is a dismissive term for the widespread manufacture of evidence, including real estate document fraud and forgery by banks, in order to fraudulently claim the right to foreclose on the homes of millions of American citizens, when the paperwork to legally do so did not exist. The forgery and fraud was also committed in order to continue the fraudulent mortgage-backed-investment scheme used to deplete American’s retirement savings, pension funds, and 401ks.
Within a few months of the media exposure, a working group comprised of all 50 state’s attorneys general and regulators from federal banking and housing agencies came together, albeit some state’s AGs dragged their feet and only joined the group after it was too politically toxic to remain on the sidelines. The former Alabama AG, Troy King, was so in the thrall of the banks that he stalled until he could no longer do so. He was the 50th AG to join the group. In 2011, Luther Strange succeeded King. As Alabama’s new AG, he was equally reluctant to investigate or rein in the fraudulent practices of the fraudulently foreclosing banks. Many of these prosecutors believe that we should be satisfied with and celebrate the Justice Department gloating over harsh prosecution and punishment of the small fry, regular people caught up in the foreclosure fraud crisis.
In January 2012, there were press leaks and reports about the imminent release of a settlement. A lot of attention was focused on the “Justice AGs” from NV, CA, DE, MA, and NY. The Obama administration was desperate to get the deal completed and signed before the 2012 state of the union address. The day before Obama’s speech, a draft of the settlement was released and widely discussed in the media and on financial blogs. Without a signed settlement, the Obama administration resorted to Plan B and formed a Residential Mortgage-Backed Securities (RMBS) working group and appointed Schneiderman as a co-chair.
On January 24, 2012, in his State of the Union address, President Obama announced the creation of his new RMBS federal prosecutorial working group. On February 9, 2012, the holdout AGs got with “the program”. To much fanfare, the White House announced the twenty-five billion dollar foreclosure fraud settlement with the nation’s top five banks (Chase, BoA, Citi, Wells, and Ally/GMAC). Many outside the financial industry immediately denounced the settlement as far too little and far too late and suspected that the lawsuits filed by the individual holdout AGs would soon be dropped or settled quietly. These criticisms were proven true. To get a sense of how squeamish the state AGs are when asked about investigating and prosecuting banks which manufactured evidence, watch the GA AG, Sam Olens, shuck-and-jive in an investigative news interview.
April 2012, stories about the lack of resources, including no office, no phone, no staff, and no executive director, devoted to the silent RMBS working group popped up over the past eight months. Later, Schneiderman himself confirmed these reports. Then last week, Eric Schneiderman announced the first lawsuit to be filed under the RMBS working group umbrella of agencies.
The disappointing suit against JP Morgan Chase/Bear Stearns will be the topic of another blog post.
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