Axelrod Is Wrong: Obama Must Protect American Families
From Wall Street Fraud

By Zach Carter
AlterNet
October 11, 2010

http://blogs.alternet.org/speakeasy/2010/10/11/axelrod-is-wrong-obama-must-protect-american-families-from-wall-street-fraud/

If senior White House adviser David Axelrod's comments this
weekend are any indication, the Obama administration is
woefully misreading the foreclosure fraud crisis currently
gripping the U.S. economy. Axelrod refused to commit the
administration to a national moratorium on foreclosures, and
mischaracterized a massive, systematic fraud perpetrated by
Wall Street banks as a set of unfortunate "mistakes." This is
not a minor scandal and it will not simply go away. President
Barack Obama needs to stand up for the middle class and
protect our economy from Wall Street theft. If he doesn't,
the economic and political price will be devastating.

The full transcript of Axelrod's appearance on CBS' Face the
Nation with Bob Shieffer is here, but here are his key
comments, emphasis mine:

    "It's bad for the housing market and it's bad for these
    institutions which is why they're scrambling now to- to
    go back through and- and- and through their documentation
    for all of this as they should. The President was
    concerned enough to veto a bill that came to him last
    Thursday, that would have unintentionally made it perhaps
    easier to make mistakes. . . . I'm not sure about a
    national moratorium because there are, in fact, valid
    foreclosures that- that- that probably should go forward.
    And where the documentation and paperwork is- is proper,
    but we are working closely with these institutions to
    make sure that they expedite the process of going back
    and reconstructing these and throwing out those that
    don't work . . . . Our hope is that this moves rapidly
    and that this gets unwound very, very quickly."

Let's straighten some facts out first. Lenders aren't just
making "mistakes"-they're fabricating documents, forging
signatures and lying to judges in order to illegally throw
people out of their homes and slap them with thousands of
dollars in illegal fees. Consumer advocates were not worried
that the bill Obama vetoed on Friday would make it easier for
lenders to make "mistakes"-they were worried it would make it
harder to expose rampant, systematic fraud committed by Wall
Street banks against American families.

Nor is this a problem that can be resolved quickly. Banks are
resorting to fraud for a reason-they don't have the documents
that prove they have the right to foreclose. It's not like
JPMorgan Chase or GMAC need to dig through a filing cabinet
to find the right form-the form doesn't exist. Banks
willfully, knowingly destroyed key documentation in order to
cut costs and boost bonuses. Other banks that bundled these
mortgages into complex securities didn't ask for this
documentation for the same reasons.

This creates legal liabilities for the banks that can push
them into failure. A lot of these securities were packed with
fraudulent mortgages-loans where banks falsified borrower
information in order to push them into predatory loans.
Investors who bought these mortgages have been trying to
force banks to repurchase the fraudulent loans. But now that
banks cannot even document which loans they own, the entire
fraudulent mortgage securitization framework may land on the
banks' doorstep. If that happens, we're going to see some
very big banks go under.

What does all this mean for borrowers? We've already seen
plenty of cases in which banks are foreclosing on the wrong
homes-kicking out borrowers who haven't missed any payments,
or borrowers who are working with the bank on receiving a
loan modification to keep them in their homes. But even for
borrowers who have stopped paying their mortgages, the fraud
process creates serious dangers. Banks charge all kinds of
fees on borrowers when they foreclose-fees that often amount
to thousands of dollars. The current wave of fraud is
enabling an onslaught of grotesque, illegal fees. When you
create new documents and forge signatures, you can claim
people agreed to ridiculous things they never agreed to, tell
ridiculous lies about the house being foreclosed on, and
generate thousands of dollars in improper fees.

In other words, banks and their lawyers are breaking the law
to steal from borrowers facing financial hardship. This
impropriety may create losses so big that megabanks are going
to fail. Smart political leaders need to get out there right
now and prove that they are backing American families, not
Wall Street elites. A foreclosure moratorium is the first
step, the second is a major new initiative to reduce mortgage
debt to a level that borrowers can afford-that prevents
foreclosures and keeps this mess from spiraling into a
financial calamity. The mortgage market needs to reflect
economic reality, not inflated banker dreams.

Other leaders have figured this out. If Obama refuses to
stand up for the middle class, he'll be hanging many
embattled Democratic members of Congress out to dry,
politically undercutting them on an issue of household
financial security in the middle of a brutal recession.
Swing-state Democrats like Senate Majority Leader Harry Reid,
D-Nevada, Rep. Debbie Wasserman-Schultz, D-Fla., and Rep.
Alan Grayson, D-Fla., Rep. John Conyers, D- Mich., and
Carolyn Kirkpatrick, D-Mich., have already endorsed
foreclosure moratoriums. Attorneys general in Connecticut,
Massachusetts, Illinois, California, Iowa, Texas, and Ohio
have either imposed state-wide moratoriums or investigations
into foreclosure fraud, and Ohio is already suing GMAC. Why
does the president want to kneecap members of his own party?

What's more, Axelrod's comments put the White House on the
same side as Republican Whip Eric Cantor, R-Va., a Wall
Street crony who voted to bailout the big banks with no
strings attached, but refused to support Wall Street reform.
For his services, Wall Street rewarded Cantor with $2.1
million in campaign contributions for the 2010 elections.
Here's what Cantor said on Fox News Sunday:

    "If you impose a moratorium on foreclosures, what you're
    telling people and institutions that lend money is they
    do not have the protection to take the risk they need to,
    to extend credit so people can get a mortgage . . . .
    You're going to shut down the housing industry if that's
    the case . . . . People have to take responsibility for
    themselves."

Cantor's reasoning is, of course, complete nonsense. People
do need to take responsibility for themselves, which is why
the government has a responsibility to stop banks from
systematically defrauding borrowers on an epic scale. But
note Cantor's positioning on the issue. He claims that if the
government does anything to help troubled borrowers, that
assistance will cause a financial catastrophe. It's a phony
story that completely ignores the financial catastrophe
already brewing, one created by massive Wall Street fraud,
not the government's big, bleeding heart. Cantor is peddling
a monstrous lie, but if Obama doesn't push- back against it,
he will politically hamstring any opportunity to fend off the
economic fallout from this mess, and leave troubled borrowers
at the mercy of Wall Street predators. 

______________________

Follow Zach Carter on Twitter http://twitter.com/zachdcarter

Zach Carter is AlterNet's economics editor. He is a fellow at
Campaign for America's Future, which he represents on the
steering committee of Americans for Financial Reform. He is a
frequent contributor to The Nation magazine.

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