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Bold Action Needed to Hold Big Banks Accountable
Fourteen months ago, Iowa Citizens for Community Improvement members and our allies from National People’s Action and the New Bottom Line campaign met with Iowa Attorney General Tom Miller in Des Moines to discuss the national foreclosure investigation that he was leading.
Miller vowed to pursue a fundamental transformation of the mortgage servicing industry. He spoke like a people’s champion, like someone who would “knock it out of the ballpark” and bring the banks to justice.
But after he announced the details of his settlement with the banks last week, we felt Miller had struck out.
A few reasons why:
- 11 million homeowners owe roughly $700 billion more on their mortgages than their homes are worth. Miller’s settlement carves out just $17 billion in principal relief for these homeowners. At best, this will reach one-tenth of them.
- Homeowners who were victims of wrongful foreclosures will receive just $2,000 in compensation. Compared to what these families lost and continue to struggle with, this seems paltry.
- In 2011, the nation’s largest banks paid $144 billion in bonuses and compensation to employees, which is about six times more than the $25 billion netted by Miller’s settlement.
The big banks are making big profits, while everyday people suffer.
When a small number of people can — through fraud, deception and outright greed — derail our economy, put our livelihoods at risk and get away with a paltry penalty, there is little to celebrate.
Thankfully, Miller’s settlement did not give the banks broad immunity for other wrongdoing, leaving open the possibility for further investigation — and prosecution.
The Obama administration, which has a lackluster record of taking on the big banks and Wall Street, needs to seize this opportunity and fight for homeowners and everyday people.
Right now, the best opportunity to hold the big banks accountable for the calamity they caused is the investigation being led by New York Attorney General Eric Schneiderman.
There are three bold steps that Schneiderman and Obama can take to move our economy forward toward recovery.
- The first is to secure a much larger commitment from the big banks — $336 billion — to write-down underwater mortgage principal.
The housing market isn’t going to reset itself, which will delay economic recovery for a long time.
More families will lose their homes, more equity will be lost and a generation of Americans who should be buying their first homes will now look at housing as a too-risky investment. This will undermine homeownership for years to come, as more and more property — and wealth — is concentrated in the hands of fewer people.
- There needs to be consequences for criminal actions. This means prison time for law-breaking bank executives. Without this, there is nothing to keep these folks from committing the same crimes.
- We need to bust up the “too big to fail” institutions so they actually serve the common good, the public interest — not corporate greed. This is not a radical agenda. The democratization of corporate institutions was at the heart of antitrust actions last century.
Bold action in the face of grave injustice is not counterproductive — it is required.
If Obama and Schneiderman take these “people first” actions to deliver justice for millions of homeowners and everyday people, then maybe we’ll have something to celebrate.
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15 Comments so far
Show AllHere's some bold action. Stop bailing out biog banks and other bankrupt corporations. No government intervention required, no taxpayers money used. How's that for bold and revolutionary?
"Americans who should be buying their first homes will now look at housing as a too-risky investment"
This guy took it all, hook, line and sinker. A house in not an investment. It's place to live in. An investment is something that is supposed to bring some gain. By the time most people pay of their mortgages they probably paid at least 150% of the original price. That means the price of that property would have to go up at least 50% to break even.
I'm really sorry you see home investment that way. That's really sad.
Looking at your home as an investment is what brought us in the current situation.
"The Justice Cascade: How Human Rights Prosecutions Are Changing World Politics" by political scientist Kathryn Sikkink gathers clear evidence that jail time for leaders who abuse their people has a long-range positive effect on the human rights situations in those countries.
The oligarchy's criminal bankers need to be jailed for the long-range good of the U.S. and the world.
It is bold inaction–not action–in the face of injustice that is required. How can you say we need to take action to bust up institutions too big to fail? These giant institutions were justifiably at risk of being busted by the market if government had not acted. So now the government is to use taxpayer money and police powers to do what the market would have done freely and for free with more efficiency and equity?
What does it mean to say there should be consequences for criminal actions? Consequences for criminal action already exist as evidenced by an unrivaled prison population in this land of the free. Instead, there should be consequences for noncriminal but irresponsible actions such as borrowing and investing in expectation of government bailout.
You erroneously state that the housing market will not reset itself. Nonsense. A real housing market would reset at deflated prices that more people could afford. This is not happening now because government policy attempts to maintain the housing bubble that it created. Politics is not allowing the market to make corrections to inflated housing prices.
What planet do you live on, and who's reality?
Actually that's how it should and probably would have worked. Had some not been considered "too big" to fail.
The Epsey doopsy of this article is the concept that banks can actually be held accountable. What a freakin joke.
"When a small number of people can — through fraud, deception and outright greed — derail our economy, put our livelihoods at risk and get away with a paltry penalty, there is little to celebrate"
They did it, will keep doing it, and until the AG gets what needs done done...hold your breath. Crime pays only for awhile. I certainly hope so.
Wait a minute...whoa . I am not real smart in real estate stuff,even though I once was married to a broker in the 80's, here's what I read
"•11 million homeowners owe roughly $700 billion more on their mortgages than their homes are worth."
The first point that stopped me cold was "more than the home is WORTH". Isn't that some arbitrary amount created by the inflated belief that shit's worth more than or less than... it is? This is patently ludicrous. Once a bank has loaned on something, they should never be allowed to consider that property value worth less than the original price, and not more either. If the parties purchase something they can't afford, that's their fault, but when someone can rip out the rug like that, it is criminal. How is that not stealing by the bank?
I need to go back to Newt's bus stop and laugh some more.
There is always depreciation and resale value. If you agree to a price, purchase an item be it a home, car or bare real estate, the value varies based on the market and the condition of the item. What's happening here though is slightly more complicated with the advent of derivatives and debt instruments, etc.. The value is more often set through spectulation and vague determinents surrounding the fancy Wall St. paper and has less to do with the condition or demand for the actual product.
Nationalization of the banks! Great idea! Let them seve the people rather than the other way around.
"In 2011, the nation’s largest banks paid $144 billion in bonuses and compensation to employees, which is about six times more than the $25 billion netted by Miller’s settlement."
The only reason "white collar" crime pays is because our Federal Government allows it to get away with crime; it also rewards them for doing so!
"There are three bold steps that Schneiderman and Obama can take"
As if the actions of public servants mattered... It would be quite a bizarre reality, if that were true. In fact, that idea defies nature. Evolution would grind to a halt if concentrated power were relevant, at all. Obviously then, it's insignificant.
Now let's down to what is in fact relevant:
The only action that's important is action taken by the people themselves. The author probably doesn't remember what went down this past summer. Credit union membership increased six-fold. Bold action, indeed. By the only ones who matter: The people themselves.
"If Obama and Schneiderman take these “people first” actions to deliver justice for millions of homeowners and everyday people, then maybe we’ll have something to celebrate."
I see no indications from past performance that either are capable of accomplishing actions such as you have outlined.