Mr. President, Stop Protecting Bankers From These State Law Enforcement Officials

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Lately we've been hear­ing some strong words from Pres­i­dent Obama about Wall Street crime. But when the cam­eras and lights aren't around, his ad­min­is­tra­tion's been work­ing fever­ishly to pro­tect bankers from state law en­force­ment of­fi­cials.

There are con­sci­en­tious state at­tor­neys gen­eral who be­lieve the law ap­plies to every­one. While they're work­ing to bring jus­tice to Wall Street, White House of­fi­cials are ob­struct­ing them by push­ing a sweet­heart deal with the banks that would end their in­ves­ti­ga­tions and pre­vent them from pros­e­cut­ing crooked bankers.

If more peo­ple knew what was hap­pen­ing, the White House would be flooded with calls and emails de­mand­ing that it stop pro­tect­ing Wall Street.

It's still not too late for that.

The Ev­i­dence

The ev­i­dence for Wall Street's crim­i­nal­ity is over­whelm­ing. The big banks have al­ready signed con­sent de­crees and other doc­u­ments in re­sponse to well-doc­u­mented charges of per­jury and fil­ing of false doc­u­ments; il­le­gal fore­clo­sures; crim­i­nal so­lic­i­ta­tion through the re­peated use of law firms and fore­clo­sure ser­vicers known to have vi­o­lated the law; in­vestor fraud; and other major crimes.

Wall Street's law­break­ing crashed the econ­omy, left mil­lions of peo­ple job­less, and cost the world's econ­omy tril­lions of dol­lars in lost wealth. Peo­ple have been il­le­gally evicted, and mil­lions were de­ceived into bor­row­ing money for real es­tate whose value had been ar­ti­fi­cially in­flated through il­le­gal means, and who now owe that money to the same bankers who com­mit­ted the crimes.

But none of the crim­i­nals have gone to jail—and they're still col­lect­ing on those loans.

The Re­sis­tance

The re­spon­si­bil­ity for pros­e­cut­ing crooked bankers be­longs to both the Jus­tice De­part­ment and the at­tor­neys gen­eral who serve as their states' chief law en­force­ment of­fi­cers. AGs for all fifty states were brought to­gether to ne­go­ti­ate with the banks over Wall Street mort­gage fraud, and quickly came under in­tense pres­sure from the ad­min­is­tra­tion and cor­po­rate in­ter­ests. Under the lead­er­ship of self-serv­ing Iowa At­tor­ney Gen­eral Tom Miller, the group began to dis­cuss a White House-backed deal that would pro­tect crim­i­nal bankers from pros­e­cu­tion and let the banks set­tle for pen­nies on the dol­lar.

The first AG to re­ject the deal was New York's Eric Schnei­der­man, whose ju­ris­dic­tion in­cludes Wall Street. Schnei­der­man had been pur­su­ing crim­i­nal in­ves­ti­ga­tions and asked the group not to ac­cept any agree­ment that would shut them down be­fore all the ev­i­dence was in. He im­me­di­ately came in for some heavy arm-twist­ing from Obama of­fi­cials like HUD Sec­re­tary Shaun Dono­van and top peo­ple at the Jus­tice De­part­ment—the same Jus­tice De­part­ment that has re­fused to pros­e­cute a sin­gle banker for crim­i­nal fraud, and can only offer weak and im­plau­si­ble ex­cuses for its fail­ure to do so.

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Ohio's Miller im­me­di­ately re­moved Schnei­der­man from the com­mit­tee lead­ing ne­go­ti­a­tions for the 50-mem­ber AG group, de­spite his state's key role in pros­e­cut­ing bank fraud. That move was ei­ther de­signed to re­move Schnei­der­man from the room while ne­go­ti­at­ing with (and for) the banks, or it was Miller's petty way of say­ing "you can't sit with us in the school cafe­te­ria any­more." Maybe it was both.

Schnei­der­man nev­er­the­less sol­diered on, ap­par­ently un­de­terred by ei­ther the ad­min­is­tra­tion's arm-twist­ing or Miller's "you are so not hang­ing with us, dude" tac­tics.

Ken­tucky At­tor­ney Gen­eral Jack Con­way soon stepped up and backed Schnei­der­man, say­ing "There should be ab­solutely no crim­i­nal or civil im­mu­nity given to banks for ac­tiv­ity that has not yet been in­ves­ti­gated." Delaware's Beau Biden also joined with Schnei­der­man, and that's im­por­tant. Many New York-based com­pa­nies, in­clud­ing my ex-em­ployer AIG, are legally in­cor­po­rated in Delaware to take ad­van­tage of that state's fa­vor­able cor­po­rate tax poli­cies. (Biden's also re­sist­ing the ad­min­is­tra­tion that his dad serves as vice pres­i­dent, which must make for in­ter­est­ing din­ner table con­ver­sa­tions at hol­i­day time.)

Mass­a­chu­setts AG Martha Coak­ley has sued five banks for al­legedly seiz­ing pri­vate prop­erty il­le­gally. And the AGs of Cal­i­for­nia and Nevada, Ka­mala Har­ris and Cather­ine Cortez Masto, have an­nounced a joint in­ves­ti­ga­tion of the mas­sive bank mort­gage ac­tiv­ity in their states.

These AGs are fight­ing cor­po­rate in­flu­ence in order to up­hold the law. They're on the right side of this fight. Look who's not.

The Deal

For rea­sons known only to them­selves, of­fi­cials in the Obama ad­min­is­tra­tion have spent more than a year try­ing to un­der­cut these AGs. They're push­ing a deal that would end their in­ves­ti­ga­tions be­fore they're even com­pleted and would im­mu­nize bankers from crim­i­nal pros­e­cu­tion.

Like the Se­cu­rity and Ex­change Com­mis­sion's no­to­ri­ous sweet­heart deals, this Obama-backed set­tle­ment would let banks buy their way out of pros­e­cu­tion with a slap-on-the-wrist set­tle­ment of $20 bil­lion-$25 bil­lion. It would also cre­ate a phony re­fi­nanc­ing pro­gram to make it look as if banks are doing some­thing about the tragedies they've cre­ated by promis­ing to re­fi­nance "as many as" 300,000 un­der­wa­ter mort­gages (mean­ing the real num­ber could be much smaller than that).

It's one more get-out-of-jail-free card for crim­i­nals on Wall Street.

The Dam­age

The so­cial dam­age from this deal would be enor­mous. Con­sider:

• It re­in­forces crim­i­nal be­hav­ior: Once again crooked bankers would go un­pun­ished. That would guar­an­tee they'll com­mit these kinds of crimes again and again, know­ing they'll never pay for it with their time or their money. Thanks to other soft deals like this one, big bank ex­ec­u­tives have al­ready promised to stop their crimes (while "nei­ther ad­mit­ting nor deny­ing wrong­do­ing") -- and then re­peated them again and again, 51 times!
• The vic­tims will pay for the crimes: Bankers de­frauded their own in­vestors by con­ceal­ing their own true fi­nan­cial pic­ture. The money paid in this set­tle­ment deal will be paid, not by the law­break­ing bankers who got rich off their own crimes, but by the very same share­hold­ers they de­frauded.
• It places the perps in charge of their own resti­tu­tion: The re­fi­nanc­ing pro­gram (for "as many as" 300,000 home­own­ers) will be run by the banks them­selves. The last ad­min­is­tra­tion pro­gram de­signed to 'help' home­own­ers be­came a tool for banks to rip them off even more. Mort­gage ser­vicers mis­stated their fig­ures in that pro­gram as much as 80 per­cent of the time. Bankers used it to ex­tract more money from home­own­ers, then fore­closed on them any­way (often with false doc­u­ments or in­ac­cu­rate fig­ures) while the Ad­min­is­tra­tion looked the other way.
• The set­tle­ment amount is a tiny frac­tion of the harm caused: There are 11.1 mil­lion un­der­wa­ter mort­gages. Home­own­ers still owe the banks $750 bil­lion for hous­ing value that has evap­o­rated. The banks ar­ti­fi­cially pumped out real es­tate val­ues, these home­own­ers bor­rowed against the in­flated prices, the hous­ing mar­ket crashed—and they're left hold­ing the bag while bankers are hold­ing their bonuses. And they still owe the banks all that money.
• It un­der­mines the fab­ric of so­cial trust: This deal re­in­forces the mes­sage that there's one code of jus­tice for the rich and pow­er­ful and an­other for every­one else. And that gov­ern­ment works for the rich and pow­er­ful, while the rest of us are on our own.

The Let­ter

We should be grate­ful for the courage and de­ter­mi­na­tion of these AGs. They need and de­serve the pub­lic's recog­ni­tion and sup­port. Vot­ers need to tell the pres­i­dent that it's wrong and un­ac­cept­able to push for a bank-friendly deal and un­der­mine these pub­lic ser­vants.

What's your note to the White House going to say? Mine will go some­thing like this:

Dear Mr. Pres­i­dent:That was one ter­rific speech you gave in Kansas the other day. It was great when you promised to make sure that "penal­ties count" for bankers. And you were ab­solutely right when you said that "Wall Street firms (keep) vi­o­lat­ing major anti-fraud laws be­cause the penal­ties are too weak and there's no price for being a re­peat of­fender."

If you be­lieve that, why is your ad­min­is­tra­tion work­ing so hard to pro­tect bankers from state law? I ad­mire Eric Schnei­der­man, Beau Biden, Jack Con­way, Martha Coak­ley, Ka­mala Har­ris, and Cather­ine Cortez Masto. Why is your staff pres­sur­ing them to stop in­ves­ti­gat­ing these crimes and let bankers off the hook?

If you meant what you said, Mr. Pres­i­dent, please tell your staff to back off and let these good peo­ple do the jobs they were elected to do.

Mr. Pres­i­dent, you said in Kansas that "a strong mid­dle class can only exist in an econ­omy where every­one plays by the same rules, from Wall Street to Main Street." So why is your ad­min­is­tra­tion try­ing to stop the states from en­forc­ing those rules?

You were right when you said that "there is a deficit of trust be­tween Main Street and Wall Street." Please re­store and pro­tect the trust be­tween those streets - and with Penn­syl­va­nia Av­enue - by di­rect­ing your ad­min­is­tra­tion to stop push­ing this cor­rupt deal and sup­port at­tor­neys gen­eral Schnei­der­man, Biden, Con­way, Coak­ley, Har­ris, and Masto.

Re­spect­fully yours,

A Voter