NYT WRITERS/REPORTERS » REALITYCHEX

Fire Joe Nocera

February 18, 2012   ·   1 Comments

Source: NYTX

By Marie Burns:

The New York Times should fire columnist Joe Nocera. In his column today, titled “Two Cheers for the Settlement,” Nocera literally cheerleads the settlement state attorneys general made with the five biggest bankers for mortgage “irregularities.”

Nocera’s defense of the settlement agreement is strange. He compares it, favorably, to the famous 1998 settlement with tobacco companies, also negotiated by state attorneys general. The difference? About a factor of thirteen. The tobacco companies agreed to pay out $246 billion ($342 billion in 2012 dollars). The banks – $25 or $26 billion, depending upon which report you read. The editors of the New York Times called the bank settlement “a wrist slap” and a “sweet deal” for the banks.

Nocera, who claims to be a liberal, is quick to dismiss liberal critics of the settlement as vindictive carpers whose goals is to “inflict a punishment” on the banks. In contrast, Nocera writes,

… the real goal of the attorneys general was less to punish the banks than to provide foreclosure relief in the here and now. The prospect of protracted litigation was anathema to them, given the millions of Americans in danger of losing their homes – and the shoddy treatment so many have received from the banks as they have tried to get mortgage modification.

What Nocera doesn’t tell you is that the attorneys general did not come close to meeting that goal. As the Times editors write, “At best, this round of relief will reach about two million former and current homeowners.” As the coalition The New Bottom Line lays out,

The restitution payments for those who already lost their homes is just a tiny fraction of the wealth stripped from so many families, especially families of color. For homeowners who were defrauded and lost their homes, $2,000 is too little, too late. And the three-year window for banks to meet the terms of the settlement means that there is little immediate relief for homeowners.

Gordon Whitman, policy director for PICO National Network of faith-based community organizations, said the deal is … a “small drop in the bucket of what really needs to be done…. From our perspective, it’s much more logical to think of this as a first step.”

As for the need to avoid “protracted litigation,” the housing bubble burst in 2008. It is 2012. And, as Matt Stoller wrote in Salon, “homeowners may not know for up to three years whether they are eligible for help.” Learning that you are “eligible” is not the same thing as getting relief. If the past is prologue, it will be months or a year – or more – before homeowners – or former homeowners – see a dime. I would call seven years and counting “protracted.”

But there’s more, Stoller also writes,

… when the banks have reached settlements with law enforcement officials, they generally don’t hold to them. The Nevada attorney general recently sued Bank of America for violating an agreements the state had made with Countrywide (once the largest mortgage originator in the country, now owned by BOA) to end various predatory practices. When you issue parking tickets instead of handcuffs for multibillion-dollar crimes, the crime spree continues unabated.

Nocera does own that “The Financial Times reported that the settlement would even allow the servicers to tap taxpayer funds from already-existing federal mortgage modification programs to lessen their liability.” But he is quick to add, “Both Attorney General Tom Miller of Iowa – who spearheaded the states’ effort – and the Department of Housing and Urban Development, which led the federal involvement, have said the story is wrong.” Huh. Let’s ask Wisconsin Gov. Scott Walker about that: “Just like communities and individuals have been affected, the foreclosure crisis has had an effect on the state of Wisconsin, in terms of unemployment,” Walker said. “This will offset that damage done to the state of Wisconsin.”

As the editors of the Milwaukee Journal Sentinel wrote, “Wisconsin will receive about $141 million in money pried loose from the banks to help cities and people who fell victim to fraud and sketchy underwriting. Of that $141 million, the state gets control of $31.6 million. And of that $31.6 million, Walker and [Wisconsin Attorney General J. B.] Van Hollen are proposing to use most of it as a one-time budget fix.” The Journal Sentinel editors argue that “All of it should be used directly for foreclosure remediation…. Walker and Van Hollen … should find another way to plug the budget hole.” But they won’t.

Bloomberg News reported that “Missouri has similar plans. Democratic Governor Jay Nixon and Attorney General Chris Koster said $40 million of its $155 million settlement would be set aside to lessen cuts to colleges and universities.” The Texas attorney general told Bloomberg his office would leave it up to the state legislature to decide how to spend the money the state controls. The lobbyists are lining up.

A number of these attorneys general, who negotiated the deal with the banks, were negotiating for their own interests as least as much as for their states’ homeowners. Wisconsin’s Van Hollen kept about 22 percent of the settlement to balance the budget. Koster of Missouri kept 25 percent. Texas Attorney General Greg Abbott is handing a gift to state legislators. You can bet those legislators will see their campaign coffers swell as special interests urge them to send piles of the settlement money their way. And, yes indeed, those legislators will remember Greg Abbott’s generosity. It is nothing short of an outright lie to pretend these attorneys general were negotiating in good faith for the victims of rampant foreclosure abuses. They were negotiating bribes – millions of dollars which each planned all along to divert to his own purposes.

Yet Joe Nocera, after acknowledging the controversy, has the gall to leave the reader with the impression that this criticism of the states and their attorneys general is baseless and “wrong.”

Nocera writes, “As part of the settlement, the banks agreed, for the first time, to servicing standards that will treat homeowners fairly. Anybody who has seen the foreclosure process up close these past few years knows how important it is to have real standards.” Well, okay, that is a big deal. Oh, wait. President Obama just appointed Richard Cordray to head up the Consumer Financial Protection Bureau, a recess appointment that allows the agency to run at full speed. Guess what the job of the CPFB is? To impose and enforce “servicing standards that will treat homeowners fairly.” Nocera treats the banks’ agreement to modify their mortgage-servicing practices as some kind of grand concession – an historic, “first time” event. Right. The banks were not conceding a thing. They have to meet fair practice standards under new CPFB rules. It’s the law. Nocera is just making one more misleading claim here in his all-out effort to fool the reader.

Nocera makes a big deal about the principal write-downs that the settlement encourages: “And it will push the servicers to – finally! – make principal reductions. There are many experts who believe that principal reduction is the only way to pull the nation out of its housing crisis, yet the banks have been loath to take that route.” As City Life/Vida Urbana notes in a release published in Market Watch,

The deal includes an estimated $17 billion for principal reduction, which is nothing compared to the $700 billion in negative equity for homeowners in the country.

This means that 1 out of 40 homeowners, with underwater mortgages, would get full principal reduction under the settlement! The number of homeowners likely to get this reduction is 1 million out of the 11 million families in need.

Each of the 1 million homeowners will get a reduction for $20,000 each. This is absurd, given that almost all of these loans are underwater by at least $100,000 each!

“’I just don’t think it’s going to be a life-changing event for borrowers,’” said Gus Altuzarra, whose company, the Vertical Capital Markets Group, buys loans from banks at a discount,” Nelson Schwartz and Shaila Dewan reported in the Times.

Most critically, the deal does not cover government-owned or insured mortgages. According to the Neighborhood Assistance Corporation of America, government-backed mortgages – FHA, VA, Fannie Mae and Freddie Mac – constitute 80 percent of all U.S. mortgages, and none of those mortgagors can take advantage of the loan modifications laid out in the settlement agreement. Since government-backed loans are geared to provide financing for low-income and first-time homebuyers, this settlement is very much a middle-class deal. Sorry, poor people! In his column, Liberal Joe says not a word about how the settlement agreement shuts out low-income buyers.

Ah, but. Joe does have some good news for whiney liberal critics:

For those who mainly care about seeing the banks punished, there will be other opportunities. The litigation relief the banks won is surprisingly narrow. States and the federal government will still be able to sue for lots of other abuses, including lying about the quality of mortgages that were bundled in toxic mortgage-backed securities.

Really? The Times editors write that as part of the “sweet deal,”

… the settlement still shields [the banks] from state and federal civil lawsuits for most foreclosure abuses, including the wrongful denial of loan modifications, excessive late fees that enriched the banks but could make it impossible for borrowers to catch up on late payments, and conflicts of interest that led banks to favor foreclosures over modifications…. Past sins in servicing and foreclosure are largely absolved.

That doesn’t sound “surprisingly narrow” to me. It is true that the agreement left the banks vulnerable to criminal prosecutions and private lawsuits related to their past fraudulent dealings. But any beneficiaries of prosecutions and private suits will likely be government entities and big investors, not financially-stressed middle-class homeowners. As Schwartz and Dewan reported,

The prosecutors and regulators still have the right to investigate … elements that contributed to the housing bubble, like the assembly of risky mortgages into securities that were sold to investors and later soured, as well as insurance and tax fraud….

Along with how broad the releases would be, California’s attorney general, Kamala Harris, also pushed for her state to be able to use the state’s False Claims Act. That would enable state officials and huge pension funds like Calpers to collect sizable monetary damages from the banks if officials could prove mortgages were improperly packaged into securities that later dropped in value.

… In other words, states, investors, insurance companies, “huge” pension funds. No mention of homeowners.

Nocera adds, “Eric Schneiderman, the attorney general of New York, is leading a joint effort with the federal government to investigate possible securitization fraud.” Even Nocera doubts Schneiderman will be able to “put the serious hurt on the banks.” Nocera suggests Schneiderman may fail because the banks meet him from a superior negotiating position; they have “leverage.” Oh yeah? What about that joint investigation Schneiderman is leading? Schneiderman had balked for months about signing onto the settlement deal because it was so generous to the banks. In order to get him on board, President Obama made Schneiderman co-chair of a new investigative team which includes officials from the Justice Department, the S.E.C. and other regulatory agencies. Having the full force of the federal government behind you sounds like a pretty good negotiating position. But the Times editor see the problem as systemic, and coming from the head down:

We are skeptical. The Obama administration squandered several months resisting Mr. Schneiderman’s insistence on a broader investigation, raising questions about its willingness to now get tough with the banks and bankers. As a practical matter, that delay has allowed some potential violations to draw closer to expiration under statutes of limitation.

We applauded President Obama’s decision to appoint Mr. Schneiderman as a co-chairman of the new investigation…. But there still needs to be a huge commitment of resources or the effort will never get to the bottom of the wrongdoing.

What kind of a commitment will President Obama make to “getting to the bottom of the wrongdoing”? Probably about the same commitment he’s made all along. None. As Thomas Frank, the author of What’s the Matter with Kansas? and a new book titled Pity the Billionaire, said in an interview this week,

Barack Obama had a once-in-a-lifetime chance to take the financial oligarchy apart – not just for electoral reasons, but because that was what democracy requires – and despite the right’s perception of him as Robespierre reincarnated, he didn’t do it. Yes, he may win re-election this fall, but at best he will be remembered as another Clinton: a guy who triangulated and got the best deals he could while facing down a right-wing nation. That the nation isn’t right wing, and that it would have followed him had he led with boldness, is something that people like you and I will get to meditate on sourly for the rest of our lives.

Of course one reason President Obama can be so indifferent to bankster misdeeds is that prominent opinion writers in the New York Times give him cover. Obama has used the feel-good excuse of “looking forward, not backward” to explain away his administration’s unwillingness to prosecute all manner of miscreants. That is essentially what Nocera says in his column, too. Forget the bad stuff the banks did; it takes too long to prosecute them. Concentrate instead on what they can do to help homeowners going forward.

To make his case, Nocera has had to dissemble. He asserts that the attorneys general got the best deal they could because of their weak bargaining position. But if their position was weak, something he does not establish but simply asserts, perhaps it was because the Obama administration was not behind them. Nocera never mentions that. Gary Rivlin, writing in the Daily Beast, does:

Bank regulators in Washington, and not the country’s attorneys general, should have been cracking down on banks that were routinely evicting people despite incomplete documentation. It’s the U.S. Justice Department and other federal agencies that should have gone after the banks when they were caught fabricating legal papers and routinely ‘robo-signing’ thousands of affidavits at a sitting. The Obama administration also might have added teeth to HAMP (Home Affordable Modification Program) rather than relying solely on incentives, which explains why HAMP has helped only a small fraction of the 3 million to 4 million homeowners it was created to help.

Matt Stoller of Salon lays out the case that the “wrist slap” to the banks is part of a long-standing Obama administration policy decision:

This policy framework isn’t obvious, because it isn’t admissible in polite company. Nonetheless, it occasionally gets out. Back in August 2010, at an ‘on background’ briefing of financial bloggers, Treasury officials admitted that the point of its housing programs were to space out foreclosures so that banks could absorb smaller shocks to their balance sheets.

Read Stoller’s whole piece if you still think the Obama administration has homeowners’ backs. Joe Nocera offers nary a hint in his column of the Obama administration policy to slow-walk foreclosure abatement.

Besides, the attorneys general all had state law on their sides. They had the power to bring not only civil suits but also criminal prosecutions. Whaddaya bet a few fat cats doing the perp walk in cuffs would move the entire mortgage-lending industry to find a more favorable solution than this settlement promises? Not only that, the banks had plenty of incentive to want to get out from under the cloud of prosecution. As Schwartz and Dewan wrote, their “investors are likely to cheer [the settlement] because it removes one more legal worry for the industry.”

Nocera’s column is misleading in its entirety and in its particulars. Nocera pretends the attorneys general got the best deal possible under the circumstances. They didn’t. Nocera portrays critics as whiners without a case. They are not. Even President Obama acknowledged that the settlement was just “a start.” Nocera leads the reader to believe that the states will not use the settlement funds for other purposes. They will. At least in several cases, that was the attorneys’ general plan all along. Nocera pretends that getting the banks to agree to fair servicing of mortgage was a big concession. It wasn’t. Banks are required under the CFPB to change their ways. Nocera asserts the banks will be subject to further “punishment.” Even he doesn’t seem to quite believe that, and the facts so far suggest otherwise. Nocera’s column is at best a whitewash. But I think it’s worse. Joe Nocera is pimping for the winners – the states, the Obama administration, and the banks. Americans who lost their homes or are paying on underwater mortgages? Good luck. Readers of the New York Times? Joe Nocera is happy to misinform you in service of his friends in high places. Joe Nocera proves in this column that he has no integrity. The New York Times, if it has any integrity, should fire him.

Marie Burns blogs at RealityChex.com

By marieburns

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