Pity Shaun Donovan. The much beset upon Housing and Urban Development secretary has the thankless task of facilitating that long sought after agreement between the state attorneys general and the banks, the one that would finally put that nasty robo-signing scandal behind us. Long anticipated, it was supposed to be signed by Christmas (not).
On Jan. 18 at least two trade publications proclaimed a settlement was "imminent." It's been almost a week since. How can hope fade so quickly?
A seemingly jury-rigged agreement whereby five mega-banks say "we’re sorry for all the bad things done to homeowners, we won’t do it again, and maybe we’ll offer some principal reductions on about a million mortgages, but in return we want to be legally excused for all these bad things we’ve done" is bound to run into resistance. And that resistance has come primarily from the breakaway six AG’s led by New York’s Eric Schneiderman (another nine AG’s were also reported to be unhappy with the direction of the settlement).
Adding fuel to this fire is Judge Jed Rakoff’s barbed decision to scuttle SEC’s business-as-usual deal with Citigroup. No doubt poor Shaun probably has his hands full getting all concerned to offer up their John Hancocks.
My guess is that Donovan and Treasury Secretary Tim Geithner are burning the midnight oil and firing up the afterburners in attempts to wrap this agreement up by Tuesday’s State of the Union address.
It’s not breaking news that President Obama’s team has resisted calls to push a strong anti-foreclosure agenda. With a re-election campaign in full swing, Obama’s advisors are hip to not wanting their boss to alienate that constituency of homeowners who pay their mortgages and heartily resent those in trouble who, in their estimation, shouldn’t have bought something they couldn’t afford. Politically speaking, the housing issue – intimately linked to the future of the economy -- is a moral hazard minefield.
Seemingly now lost in space is the premiere role played by Alan Greenspan, the grand Pied Piper, who in the boom years led families into homeownership heaven aided and abetted, countrywide, by archangels like Angelo Mozilo. For Republicans, this past doesn’t even compute. It’s been re-written and, by extension, they’re less concerned with doing a consumer friendly tap dance: witness Mitt Romney’s comments to a Nevada audience about wanting to push foreclosures to their Darwinian end.
So, when you have a small bunch of AG’s suddenly saying, “Hey, wait a minute. We’re not signing on to some agreement that forecloses on our right to investigate allegations of fraud, civil, criminal or anything else,” the Obama administration’s response memorialized in this proposed settlement seems to fall lockstep in line with the Republicans. "Let’s move on."
There was an interesting exchange on CNBC in October between Bank of America CEO Brian Moynihan and talking head Larry Kudlow regarding the gaggle of rogue AG’s. Kudlow said to Moynihan: "So, these Attorneys General around the country that are blocking you because there were a few bad robo-type letters or whatever they were, robo-signing letters, they’re like keeping the economy on its back." Moynihan was smart enough to not provide an audible response, simply a knowing grin of sorts.
So where does this "moving on" strategy leave the struggling homeowner with little in the way of resources? It’s too early to prognosticate on the effectiveness of the new Consumer Financial Protection Bureau, although director Richard Cordray’s sensibilities do seem consumer-inclined (and he still faces the onslaught of Republican critics). There’s the efforts of the aforementioned "rogue" AG’s, but given a Presidential campaign in full swing, no doubt pressure will be exerted to keep the lid on any investigation that has the potential to explode into a full-scale Enron.
If there’s any bright spot of hope in this mess, it may come in the form of the legal Davids fighting the banking Goliaths: consumer lawyers like Florida based April Charney and James Kowalski, both engaged in guerilla warfare with the likes of MERS, and more recently, with the infamous get-‘em-in, get-‘em-out "rocket docket" foreclosure courts; North Carolina’s O. Max Gardner, whose bankruptcy boot camps equip participants with the tools to fight the onslaughts of foreclosure mill attorneys; and the nonprofit National Association of Consumer Advocates, providing experienced legal representation for homeowners in the trenches.
There are also grass-roots online support groups like Foreclosure Hamlet and MSFraud.org, which have created networks to share, support and work on mortgage related issues. The big question mark may be whether Occupy Wall Street can continue to formulate and implement direct action strategies aimed at shutting down evictions and re-taking vacant properties.
The pressure is on Shaun Donovan. He’s like one of those participants in a team building weekend, putting his intestinal fortitude to the test with a ritual walk over hot coals. He knows it going to hurt – a lot – but for the sake of his colleagues, he sucks it in and just pretends it’s all just fine.
Then I had another thought. If Alan Greenspan were at the far end of the pit, there could be a quintessential Laurel and Hardy moment. Sean to Alan: "Well, it’s another nice mess you’ve got me into."
Joel Sucher, a filmmaker with Pacific Street Films in Hastings-on-Hudson, N.Y., is working on "Foreclosure Diaries," a documentary about the financial crisis.