Thursday, September 01, 2011

Suing the suits: Right move, too late?

From the NYT:
The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation.

The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter.
This is right move, not at the right time. Something like this should have happened years ago.

Much the same can be said about the choice of Alan Krueger. Summers and Ghouls-bee are gone. Geithner, alas, is still there.

Is it possible -- is it just possible that the pressure lefties have placed on Obama has started to show some results?

When the Tea Party leaders assail Obama and the Federal Housing Finance Agency for this lawsuit, they will reveal themselves to be the puppets of Wall Street -- even though many baggers joined the movement because they were outraged by the big bank bailouts. Maybe this situation will educate the otherwise ineducable baggers about who is really in charge of their movement.
The impending litigation underscores how almost exactly three years after the collapse of Lehman Brothers and the beginning of a financial crisis caused in large part by subprime lending, the legal fallout is mounting.

Besides the angry investors, 50 state attorneys general are in the final stages of negotiating a settlement to address abuses by the largest mortgage servicers, including Bank of America, JPMorgan and Citigroup. The attorneys general, as well as federal officials, are pressing the banks to pay at least $20 billion in that case, with much of the money earmarked to reduce mortgages of homeowners facing foreclosure.

And last month, the insurance giant American International Group filed a $10 billion suit against Bank of America, accusing the bank and its Countrywide Financial and Merrill Lynch units of misrepresenting the quality of mortgages that backed the securities A.I.G. bought.
The only problem with these lawsuits are the numbers. $10 billion is not going to make 'em scream.

If the banks are ever truly threatened, you'll be hearing a scream like you've never heard before. And suddenly the Republicans will be forced to support Wall Street in very public ways, under the rubric of fighting "socialism." That will demonstrate only the disingenuous nature of their rhetoric.

Incidentally, the guy in charge of the FHFA is named Edward DeMarco. Here's some background on him. We are going to be hearing his name more often, methinks. The politics of the situation are intriguing: He was a Bush appointee who has been at loggerheads with Obama and Geithner So when the baggers slam Obama for the upcoming lawsuits -- and believe me, they will -- they will be slamming someone whom Obama doesn't consider a team player.

So the FHFA lawsuits may be happening in spite of Obama -- who, for his part, is hoping to get some lolly from the Wall Streeters for his relection bid. Even though the bankers have made clear that they hate him.

This could get interesting!

SEC reform. These lawsuits would never have had any need to exist if the SEC had not been corrupt to its core. Matt Taibbi has a great column about SEC reform. Basically, the idea is to stop the "revolving door" practices cold, and to make sure that the SEC has an enforcement division.

The revolving door issue is the big one. As things stand, the SEC can refer cases to the Justice Department. Referrals have gone way, way, WAY done over the past decade or so. And that's yer problem, right there.

Back to Obama. The big question is: Is it too late? For most of my readers -- and, to a large degree, for myself -- the answer will be yes. The pooch has been well and truly screwed. On the other hand, there is this election coming up.

Wavering Democratic voters will face a tough choice: Do they support (with clothespin attached to nose) a bad Dem president who has started to do some of the right things, but only when re-election came into view? Or do they sit this one out and allow someone like the abominable Perry to win?

Laff of the day: On YouTube, the following comment was made about my film "Libertarian Lies":
"Obama put Larry Summers and Tim Geithner in charge of the economy. If that makes him socialist, I'm the King of Peru."

Well then smart guy, by the very implications of your own stupid fucking statement, you must be the King of Peru. Dumbass.
Has anyone seen my pet bear? He used to be around here somewhere. His name is Paddington.
Suing the banks for the fraudulent mortgages is good, but no one is being investigated and going to jail for the fraud. Litigation of this type takes a long time and the courts won't extract the money that was lost. I'm not impressed.
Thoughtful post, Joseph. Even if you are correct (that he is trying to do the right thing), it is too little, too late for me. President Obama would have to start channeling the unholy child of FDR and LBJ to get me to vote for him -- and that is not going to happen.

I am still hoping for a Democratic primary challenge, but if not, I may go Republican and vote for the sanest candidate in that primary. If the Senate stays Democratic, we might survive the next 4 years.

It's not too late, it's too early. Unless such lawsuits such are going to be pursued today for the public good, better that they not be initiated. Just like the $20B attorneys general case, the figures being discussed are chump change to Wall Street.

Better that a cloud of uncertainty be left hanging over these rotten institutions than that they should be slapped on the wrists and handed a clean slate.
Wall Street dumping Obama to back a generic republican why?

Perhaps they figured they got what they paid him for and he was no longer needed?

Or could it be they had a psychological profile done and came to the conclusion if the FDR Democrats and Independents left in large enough numbers he would change course ala "Don't Ask" because of his need to be worshiped.
You know, Mike, the psychology is a bit hard to understand. Obama gave one (1) interview in which he engaged in some anti-Wall Street rhetoric. The Streeters never forgave him for that. They acted as though they had been raped. This, despite the fact that the interview could easily be placed in the "just words" category.

Yet the tea-stained Republican candidates have large sections of their websites devoted to condemnations of the bank bailouts. And THAT is considered forgivable on Wall Street.

I know that the point I'm about to make may be hard for us anti-Obama liberals to understand, but there was always great fear that O might actually DO something to inconvenience the bankers. We think of Obama as their creature -- and so he has been, for the most part. But I know that the bankers have always feared that their creature will do something against the script.

That fear will persist into the next administration, should Obama be re-elected.

I don't think that the bankers have that same kind of fear when it comes to Perry, Bachmann, or even Romney. They SHOULD be afraid, especially of Bachmann. She's a nut, and nuts are not predictable.
Great job on the video Joseph - I'm in awe of your skills!

I'm a bit hazy on the detail, but generally dislike the Libertarian ideology. Less government isn't the answer to anything; human nature needs some prudent regulating so's to avoid descent into our old (?) wild state !

Obama is now cynically pandering a bit - many will fall for his game, but many won't.

I can't decide on how to vote in 2012 until we find out who is to be the R's nominee.
You ever see that bit right at the end of the Lord of the Rings where Sauron suddenly realises that the Hobbits and the Ring is right by Mount Doom? I think Obama has just had a similar moment.

He has been playing some kind of political game, without realising that its "the economy stupid". Edward Harrison has quite a nice post this morning up which quotes Hoover. Hoover knew what he was up against. He tried to produce a big enough package of fiscal measures to offset the damage. Sadly just didnt appreciate the scale of the thing.

Obama isnt as smart as Hoover. He has just notice that the economy aint great. He probably thought it would recover on its own. It wont. And frankly there is insufficient understanding in this administration for the problem they face. We are all in great trouble.

As for the lawsuits, better for the Executive to be suing the banks than private individuals or individual attorney generals. If the Feds dont take over the suits then what if the banks lost badly? This way the government can settle for 20 bn and pretend "we won".

According to Naked Capitalism, the 50 State settlement is a sham, and the white house is quietly/not so quietly trying to make it happen. The DA of New Mexico has just filed a REAL lawsuit alleging criminal wrongdoing.

This thing will get more complicated, and the white house won't help matters.

And about courts extracting money, Alabama supposedly allows up to 9X damages, so if they follow New Mexico...KAPOW!!!
Lawsuits and fines are just a cost of doing business. Until these guys start going to prison (and I mean real, serious, bunking with Bubba the Axe-murderer prison, not Club Fed), nothing is going to change.
I would love to think that we'll finally have our 'Pecora' moment and that the crimes the financial sector perpetrated on the country [if not the entire world] will be exposed, investigated and indicted. The Rule of Law has been tossed to the curb for far too long, where the 'rules' only apply to us ordinary people, not the casino players. I want to see these gangsters out on the street doing a perp walk. It's the only way any faith in government can slowly be restored.

However, the recent pressure on AG Schneiderman, having him tossed off the executive committee investigating mortgage fraud [reportedly at the Administration's nod], doesn't give me a great deal of confidence that this sudden acknowledgement of fraudster activity isn't simply more smoke and mirrors for the peanut gallery.

I mean please! POTUS has 'just' discovered that the job situation is lousy? Where the hell has he been the last 3 years?

I'd really, really like to be wrong about this but the last three elections have turned me into a raging cynic.

That being said, it is a fascinating thing to ponder: what would the TP members do if, in fact, the Administration goes after the TBTFs, sends the dogs in for their raunchy hides? This was the original intent of the whole TP movement. Should be very interesting to watch.

Peggy Sue
It's not that the emporer has noticed that Rome is burning (he supplied the accelerant if not the match and fuel) but that he might get called into account by real Democrats and thinking Independents.

If that happens what will he do?

Flip-flop and go after the banksters?

I think that's why Wall Street is looking at generic GOP, they figure Obama might not stay bought. I think thats what their psychological profilers told them.
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