As we've noted for years, the entire strategy of Washington towards the economy is to cover up the fraud [9] which caused the financial crisis ... even though prosecuting fraud and re-establishing the rule of law is the only way [10] to get out of this depression [11].
One major front in Washington's cover-up effort has been to settle fraud cases with the big banks for pennies on the dollar. This is a backdoor bailout for the banks [12], encourages them to commit more fraud, and fails to plug the basic holes in the economy which are preventing a recovery.
Why are we bringing this up now?
Because Obama is making a giant push to pressure the states attorneys general [13] to settle all of their mortgage-related fraud claims against the banks for pennies on the dollar.
Yves Smith - who has an ear to the ground on this - warns that a settlement which hurts consumers and the economy will happen very quickly if people don't raise a ruckus.
Smith is asking [14] people to call their state attorney general (not their elected reps) to oppose the settlement:
Here are some of the reasons to oppose a settlement:
1. There have been virtually no investigations, and the Administration has engaged in cover-ups rather than trying to get to the bottom of the mortgage mess
2. The big argument made in favor of the deal, that it will help borrowers, is patently false. Remember, Countrywide entered into a deal with attorney generals just like this, where they agreed to do mods in return for a settlement on abuses. Guess what? They didn’t do the mods. To add insult to injury, they actually abused homeowners who should have gotten mods. Nevada AG is suing Countrywide now over its failure to comply with the terms of its settlement. And even if some mods miraculously did get done, the settlement is designed to have banks hit a dollar amount. That means they will focus on the biggest loans, which means any relief will go to a comparatively small number of people in (originally) big ticket houses.
3. The Administration has only one chance to get this right. Now you might argue that Team Obama has no intention of getting the mortgage mess right, but the tectonic plates suddenly seem to be moving in elite circles. The Fed realizes that housing is a BIG problem and has even started making noise about it. Yet Obama is moving forward with a plan cooked up in late 2010 that is completely out of whack with the urgency and severity of the problem. Note that this settlement will NOT stop private actions, such as borrowers fighting foreclosures. And we will continue to banks refuse to take losses and drag out foreclosures to maximize fees. That will lead to continued pressure on housing prices in many markets as buyers stay on the sidelines, fearful of buying before a large shadow inventory clears.
Leaving the AGs free to investigate and increase the pressure that is already building up in the system is the best chance we have to deal with widespread fraud.
The attorneys general really need your support. It helps them to hear that their constituents appreciate them standing up to the banks and the Obama administration.
PLEASE call them TODAY. Here is a list of phone numbers [15]. If you can’t get through, send an e-mail.
Please also sign this petition [16] from Campaign for America’s Future (it has some talking points if you need them for the AG calls). Note you can opt out of being put on their mailing list (I know that has been a sore point with some past petitions). I know it is futile to ping Obama, but they will collect the number of people who sign, and that will in turn bolster the dissident AGs.
Please call today. Unlike Congresscritters, who get a lot of constituent mail and phone calls, AGs get much less in the way of messages from state citizens, so your calls will make a difference.
Smith tells me that it is especially important for residents of California, Virgina, Texas, Florida and South Carolina to call their attorneys general and tell them that they need to stand firm in the face of pressure from Obama.