Cantwell to AG Holder: Don’t bow to banks

By:  Joel Connelly
Source: Seattle Post-Intelligencer

The U.S. Justice Department should fully probe crimes and wrongdoing by major banks before the federal government and states absolve them of liability, Sen. Maria Cantwell, D-Wash., said Thursday.

Cantwell, an architect of 2010 financial reform legislation, sent a sharp letter to Attorney General Eric Holder, whose department has yet to bring any criminal charges over a mortgage lending meltdown that cost three million Americans their homes.

“I am concerned that recently reported settlement proposals will effectively absolve these financial institutions of substantial civil and criminal liability in one of the largest alleged fraud schemes during the financial crisis,” wrote Cantwell.

Cantwell argued that a proposed $20 billion settlement is not nearly enough for victims of foreclosure fraud or millions of Americans who face foreclosure.

Through June of 2011, Washington had the 15th highest foreclosure rate in the country.  RealtyTrac reports the Evergreen State had 4,450 new foreclosure filings in June and that overall, there were 29,398 foreclosure properties.

Washington was also home to the largest bank failure in American history, when Washington Mutual (“the friend of the family” in its ads) was seized and sold to J.P. Morgan Chase in September of 2008.

No criminal charges were ever filed.  On Tuesday, the Federal Deposit Insurance Corp. settled its $900 million lawsuit against three top WaMu executives for just $75 million — money that will come not from executives’ pockets but from the bank’s liability insurance.

The settlements come despite a Senate Subcommittee on Investigations report on WaMu that detailed extensive evidence of “systematic” fraud in new mortgages, and internal audits at WaMu that uncovered fraudulent documents.

State attorney generals, including Washington’s Rob McKenna, are in the midst of settlement negotiations.  One major state — New York — recently pulled out of the pending deal.

Echoing the Senate subcommittee’s report on WaMu, Cantwell wrote to Holder:

“As a result of the pump-and-dump scheme perpetrated by the nation’s largest banks that inflated — and burst — the housing bubble, an estimated 14 million Americans are underwater, owning $700 billion more on their homes than those homes are worth.

“A $20 billion settlement is woefully inadequate to compensate the wrongfully evicted or homeowners struggling to stay in their homes.  Much more should be required of banks to provide meaningful help (to) underwater homeowners and compensate foreclosure fraud victims.”

“A settlement with mortgage servicers must also require reforms to ensure such abuses do not happen again.”

Holder is under more than a bit of public pressure.  CBS’ “60 Minutes” recently ran a scathing analysis of the Department of Justice’s failure to prosecute.

The Occupy Wall Street movement has targeted big banks, who were bailed out in the crisis by big government.  The federal government disbursed an estimated $4.7 trillion to financial institutions during the crisis, and guaranteed an additional $12.87 trillion.

“Holding banks accountable for abusive and fraudulent practices, while compensating damaged homeowners, wrongfully evicted, local governments and defrauded investors is vital to restoring . . . confidence,” Cantwell told Holder.

“I urge you to ensure that any settlement with mortgage servicers over alleged foreclosure abuses does not absolve liability for crimes and wrongdoing that has yet to be fully investigated, and ensures just compensation for victims.”