Fraud Probe Has Real Teeth, Banks Are Running Scared
Well what a wild week it has been. When we came to work on Monday we feared President Obama would put the housing crisis to bed without ever holding the banks’ feet to the fire.
The settlement with the banks, which we have blogged about ad nauseam this week, seemed as sure as a chip-shot field goal.
But thanks to President Obama’s suddenly get-tough approach, as evidenced by his State of the Union speech, we’ve seen the banks’ kick go wide-right and now all bets are off.
Can There Be Real Change In Mortgage Industry?
Now we are not completely sold that things will play out exactly as homeowners would like, this is of course the federal government we’re talking about, but for the first time we have a true sense of optimism. The President may finally be seeing things our way, and we want to throw our full support behind him.
There is no doubt cages have been rattled in the mortgage industry, and nerves have been frayed. If Obama’s plan to re-write the foreclosure rules didn’t have some kind of teeth, then we doubt we’d be seeing the type of reverberation thorough the media and the top echelons of government that we’ve detected in the last few days.
Banks Are Fearful of Settlement Collapse
The settlement could be falling apart at the seems, at least JPMorgan Chase CEO Jamie Dimon thinks so. He told CNBC this morning that Obama’s announcement to investigate the packaging and servicing of mortgage loans could stop the settlement cold.
“It has a pretty good chance of derailing it,” Dimon said in a televised interview from Switzerland, adding later, “I think it would be better for America if the settlement took place.”
Guess Dimon hasn’t been reading the South Florida Law Blog. You and I know it would be better for the BANKS if a settlement took place now, and we suspect Dimon knows that too.
From the moment the details of the settlement became public, there was push back from some of the Attorneys General, the legal community, and the media.
The New York Times mirrored our thoughts, in this Op-Ed piece published in Thursday’s paper they also wondered if this was finally the investigation that would end with criminal prosecution and dare we say, jail time.
New York AG Promises to Leave No Stone Unturned
The importance of the appointment of New York AG Eric Schneiderman, which we mentioned yesterday, can not be understated. His new unit, which will answer to the existing Financial Fraud Enforcement Task Force, will be composed of members of the Department of Justice, the SEC and the IRS. It will also be working with the existing hierarchies of those organizations. So his reach will be far and wide, and we believe this investigation has the potential to do some real good.
Schneiderman, along with California AG Kamala Harris, have been some of the most outspoken critics of the settlement, and he is promising a thorough investigation of ‘every aspect of the conduct that created the bubble and crash’.
To us, those words ring true. Obama is embracing real change with his appointment, and we can’t wait to see what happens next.