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.