Axelrod Is Wrong: Obama Must Protect American Families From Wall Street
Fraud
by Zach Carter
Alternet: October 11, 2010
If senior White House adviser David Axelrod's comments this weekend are any
indication, the Obama administration is woefully misreading the foreclosure
fraud crisis currently gripping the U.S. economy. Axelrod refused to commit
the administration to a national moratorium on foreclosures, and
mischaracterized a massive, systematic fraud perpetrated by Wall Street
banks as a set of unfortunate "mistakes." This is not a minor scandal and it
will not simply go away. President Barack Obama needs to stand up for the
middle class and protect our economy from Wall Street theft. If he doesn't,
the economic and political price will be devastating.
The full transcript of Axelrod's appearance on CBS' Face the Nation with Bob
Shieffer is here, but here are his key comments, emphasis mine:
"It's bad for the housing market and it's bad for these institutions which
is why they're scrambling now to- to go back through and- and- and through
their documentation for all of this as they should. The President was
concerned enough to veto a bill that came to him last Thursday, that would
have unintentionally made it perhaps easier to make mistakes. . . . I'm not
sure about a national moratorium because there are, in fact, valid
foreclosures that- that- that probably should go forward. And where the
documentation and paperwork is- is proper, but we are working closely with
these institutions to make sure that they expedite the process of going back
and reconstructing these and throwing out those that don't work . . . . Our
hope is that this moves rapidly and that this gets unwound very, very
quickly."
Let's straighten some facts out first. Lenders aren't just making
"mistakes"-they're fabricating documents, forging signatures and lying to
judges in order to illegally throw people out of their homes and slap them
with thousands of dollars in illegal fees. Consumer advocates were not
worried that the bill Obama vetoed on Friday would make it easier for
lenders to make "mistakes"-they were worried it would make it harder to
expose rampant, systematic fraud committed by Wall Street banks against
American families.
Nor is this a problem that can be resolved quickly. Banks are resorting to
fraud for a reason-they don't have the documents that prove they have the
right to foreclose. It's not like JPMorgan Chase or GMAC need to dig through
a filing cabinet to find the right form-the form doesn't exist. Banks
willfully, knowingly destroyed key documentation in order to cut costs and
boost bonuses. Other banks that bundled these mortgages into complex
securities didn't ask for this documentation for the same reasons.
This creates legal liabilities for the banks that can push them into
failure. A lot of these securities were packed with fraudulent
mortgages-loans where banks falsified borrower information in order to push
them into predatory loans. Investors who bought these mortgages have been
trying to force banks to repurchase the fraudulent loans. But now that banks
cannot even document which loans they own, the entire fraudulent mortgage
securitization framework may land on the banks' doorstep. If that happens,
we're going to see some very big banks go under.
What does all this mean for borrowers? We've already seen plenty of cases in
which banks are foreclosing on the wrong homes-kicking out borrowers who
haven't missed any payments, or borrowers who are working with the bank on
receiving a loan modification to keep them in their homes. But even for
borrowers who have stopped paying their mortgages, the fraud process creates
serious dangers. Banks charge all kinds of fees on borrowers when they
foreclose-fees that often amount to thousands of dollars. The current wave
of fraud is enabling an onslaught of grotesque, illegal fees. When you
create new documents and forge signatures, you can claim people agreed to
ridiculous things they never agreed to, tell ridiculous lies about the house
being foreclosed on, and generate thousands of dollars in improper fees.
In other words, banks and their lawyers are breaking the law to steal from
borrowers facing financial hardship. This impropriety may create losses so
big that megabanks are going to fail. Smart political leaders need to get
out there right now and prove that they are backing American families, not
Wall Street elites. A foreclosure moratorium is the first step, the second
is a major new initiative to reduce mortgage debt to a level that borrowers
can afford-that prevents foreclosures and keeps this mess from spiraling
into a financial calamity. The mortgage market needs to reflect economic
reality, not inflated banker dreams.
Other leaders have figured this out. If Obama refuses to stand up for the
middle class, he'll be hanging many embattled Democratic members of Congress
out to dry, politically undercutting them on an issue of household financial
security in the middle of a brutal recession. Swing-state Democrats like
Senate Majority Leader Harry Reid, D-Nevada, Rep. Debbie Wasserman-Schultz,
D-Fla., and Rep. Alan Grayson, D-Fla., Rep. John Conyers, D-Mich., and
Carolyn Kirkpatrick, D-Mich., have already endorsed foreclosure moratoriums.
Attorneys general in Connecticut, Massachusetts, Illinois, California, Iowa,
Texas, and Ohio have either imposed state-wide moratoriums or investigations
into foreclosure fraud, and Ohio is already suing GMAC. Why does the
president want to kneecap members of his own party?
What's more, Axelrod's comments put the White House on the same side as
Republican Whip Eric Cantor, R-Va., a Wall Street crony who voted to bailout
the big banks with no strings attached, but refused to support Wall Street
reform. For his services, Wall Street rewarded Cantor with $2.1 million in
campaign contributions for the 2010 elections. Here's what Cantor said on
Fox News Sunday:
"If you impose a moratorium on foreclosures, what you're telling people
and institutions that lend money is they do not have the protection to take
the risk they need to, to extend credit so people can get a mortgage . . . .
You're going to shut down the housing industry if that's the case . . . .
People have to take responsibility for themselves."
Cantor's reasoning is, of course, complete nonsense. People do need to take
responsibility for themselves, which is why the government has a
responsibility to stop banks from systematically defrauding borrowers on an
epic scale. But note Cantor's positioning on the issue. He claims that if
the government does anything to help troubled borrowers, that assistance
will cause a financial catastrophe. It's a phony story that completely
ignores the financial catastrophe already brewing, one created by massive
Wall Street fraud, not the government's big, bleeding heart. Cantor is
peddling a monstrous lie, but if Obama doesn't push-back against it, he will
politically hamstring any opportunity to fend off the economic fallout from
this mess, and leave troubled borrowers at the mercy of Wall Street
predators.
Follow Zach Carter on Twitter http://twitter.com/zachdcarter
Zach Carter is AlterNet's economics editor. He is a fellow at
Campaign for America's Future, which he represents on the
steering committee of Americans for Financial Reform. He is a
frequent contributor to The Nation magazine.
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