Responding to public demands to prosecute the banks responsible for creating the financial crisis by speculating in sub-prime mortgages, President Obama announced on Tuesday a new financial irregularities task force. The new unit was announced in the State of the Union address.
The task force will be headed by New York's attorney general Eric Schneiderman. Schneiderman, along with the attorney general in California and other states, has been critical of efforts by the Department of Justice to rush negotiations for a settlement with the big banks responsible before possible criminal activity has been adequately investigated.
California, one of the states with the largest number of foreclosed homes, had withdrawn from the talks.
Schneiderman promised to move ahead quickly. ""There have been investigations going on in various states and branches of the federal government," he said. "We're now making a concerted effort to pull everything together and move forward aggressively to address these issues."
According to the Los Angeles Times, the new investigation will be separate from the Department of Justice's effort to make a deal with the banks. "The multistate talks all relate to post-crash conduct. These are abuses in the foreclosure process," he said. "Our working group is focusing on the conduct related to the pooling and creation of mortgage-backed securities...the conduct that created the crash, not the abuses that happened after the fact."
Prior to the president's announcement, colorofchange.org and other civil rights and progressive groups had initiated a signature campaign demanding that the banks be investigated. More than 360,000 signatures were delivered in the recent period to the Obama administration.
In addition, on Monday Democratic lawyers joined Sen. Sherrod Brown, D, Ohio, in his criticism of the size of the settlement federal regulators have been proposing to the Attorneys General. Brown, describing the deal to the Washington Post, said, "We're talking about not much more than a slap on the wrist."
While the settlement seems to be in the range of $25 billion, making it one of the largest such cases on record, housing advocates and other groups are calling for much more. Van Jones and George Goehl, in a recent op-ed, called for a minimum of $300 billion. They write, "The banks must pay a minimum $300 billion in principal reduction for homeowners with underwater mortgages and/or restitution for foreclosed-on families. This is essential. Every effort to reboot the housing market has failed because it has not done the most essential thing: actually reduce the massive debt load carried by homeowners."
Banks and mortgage companies reaped hundreds of billions in profits both prior to and after the financial crisis. Over 8 million families have lost their homes since the start of the housing meltdown.
Black and Latino homeowners were singled out by the bank's predatory lending practices, resulting in the biggest wealth loss in these communities in U.S. history.
Unlike the savings and loan scam of the 1990s, to date no one has been criminally prosecuted for fraud.
Photo: Protest in Washington State. Tim Wheeler/PW