MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT
Okay, so Senator Warren actually wrote a polite, detailed letter to Attorney General Holder. There was no shouting or acrimony.
However, in Washington, for a freshman senator to imply in official correspondence made public that the Department of Justice is not doing its job in investigating, prosecuting and even fining banks and secondary lenders in regards to multiple counts of mortgage lending violations is akin to a freshman at high school accusing the principal of letting teachers steal milk money from the desks of students.
It may be professional in tone, but Warren's letter is a direct challenge to the criminal impunity provided to and limited fines assessed by the DOJ on Wall Street for their multiple schemes to defraud both mortgage borrowers and investors.
The Huffington Post featured the letter, which bluntly states:
I am concerned that this might be yet another example of the federal government's timid enforcement strategy against the nation's largest financial institutions. I believe that if DOJ and our banking regulatory agencies prove unwilling over time to take the big banks to trial or even require admission of guilt when they cheat consumers and break the law -- either out of timidity or because of a lack of resources -- then the agencies lose enormous leverage in settlement negotiations.
There are a number of federal agencies involved in the lax regulation and minimal punishment (no jail time) of the financial industry for its role, particularly in the creation of a toxic subprime mortgage scam, in the economic collapse that burst open in the autumn of 2007.
BuzzFlash at Truthout has written several stories on the innovative efforts of the city of Richmond, California, to reclaim its community for its citizens from predatory corporations. One of its efforts involves the threat to seize foreclosed homes (that meet certain criteria of being foreclosed as a result of mortgage lending fraud, abuse or error) through the use of eminent domain. We wrote about how the chief federal housing regulator is joining with Wall Street banks and secondary mortgage lenders to oppose this bold effort to restore a fair playing field to the housing market.
However, some readers have written e-mails blaming mortgage borrowers for their own plights. This may be accurate in some cases, but the massive defaults that have occurred have come from so many different kinds of lending fraud that it is difficult for the average consumer of news to keep up with them. And it is proven that minority communities were targeted for fraud and manipulation by lenders.
To name just a few, banks targeted minority communities for second "balloon" mortgages without fully disclosing the terms or expanding mortgage payments. Banks re-possessed homes through robo-signing of foreclosure notices without examining if the houses were actually behind in payments or the details of the chain of ownership. Bank employees were told not to speak publicly about the deceptive practices employed to push usurious lending. Banks would make "adjustment" agreements with some under the water homeowners only to sell blocks of mortgages to secondary lenders who wouldn't honor the agreements and, instead, sold the foreclosed homes and properties to investors such as the Blackstone Group. Even investors were not fully informed of the risks of bundled mortgages.
These are just a few of the fraudulent techniques that the DOJ appears to be willing to treat as non-systemic tactics that require no criminal punishment.
The Warren letter to Holder is a tour de force of knowledgeable restraint combined with a fearless call for accountability.
One key factor that Warren alludes to is that by not appropriately applying legal sanctions against those who abused the mortgage system, citizens are left to think that the mortgage holders are solely at fault, because the DOJ is protecting the mortgage lenders rather than those struggling to save their houses, families and dreams from predatory and deceptive practices.
On a purely financial -- let alone criminal -- level, Warren charges the federal government with settling for 0.6% of the total current potential liability of fines of $37 billion for lenders breaking the law.
Meanwhile, those defrauded are left living out of cars, with relatives or on the street, as the DOJ gives a nod and a wink to those in the financial elite who defrauded them.