Obama's Choice on Housing: A Sweetheart Deal for the 1%
or a Fair Deal for the 99%
by Van Jones and George Goehl
Published on Monday, January 23, 2012 by Common
Rumor has it that as early as today, after months of
negotiation with big banks, the White House may
announce a settlement that would let the banks off the
hook for their role in the foreclosure crisis -- paying
a tiny fraction of what's needed in exchange for
blanket immunity from future lawsuits.
We hope these rumors are untrue.
President Obama has the ability to stop and change the
direction of this sweetheart deal. He should reject any
deal that benefits the one percent and lets the big
banks get away with their crimes. Instead, the
president should stand with the 99 percent and push for
real accountability and a solution that will help
millions of people in this country.
Here are the hard facts about the housing crisis we
3.5 million Americans are homeless.
18.5 million homes sit vacant.
Since 2007, more than 7.5 million homeshave been
Default and foreclosure rates are now several times
higher than at any time since the Great Depression.
If President Obama is serious about solving this
crisis, he must ensure three things:
First: The banks must pay a minimum $300 billion in
principal reduction for homeowners with underwater
mortgages and/or restitution for foreclosed-on
families. This is essential. Every effort to date to
reboot the housing market has failed because it has not
done the most essential thing -- actually reduce the
massive debt load carried by homeowners.
As it stands, the deal likely to be announced Monday
would have the banks pay only $20 billion, an
astonishingly small fraction of what's needed. Add up
all the underwater homes in America, and there's an
estimated $700 billion in negative equity in the
country, according to a recent study. If banks fix what
they broke and write down principals for all underwater
mortgages, this would free up millions of people to
pump billions of dollars back into local economies,
create jobs, and ultimately generate revenue to help
invest in things that will help our economy grow.
Second: There must be a full-fledged, full-blown
investigation into Wall Street financial fraud by the
Department of Justice. There should be a task force
with the staff resources, the authority, and the
explicit mission of seriously investigating fraudulent
behavior in the way home mortgages were securitized.
Reports of the current deal suggest banks could walk
away without any actual investigation into their role
in the housing crisis.
Third: There should be no civil or criminal immunity
for the banks from future lawsuits. That means there
should be no broad release of claims in any current or
future negotiation or settlement.
The banks must pay to help solve the crisis they played
such a big role in creating. They can afford it.
U.S. banks raked in $35 billion in profits last summer
alone and are currently sitting on a historically high
level of cash reserves of $1.64 trillion. The six
biggest banks -- Bank of America, Wells Fargo,
Citigroup, JP Morgan Chase, Goldman Sachs, and Morgan
Stanley -- hold assets totaling $9.5 trillion; and
together paid an income tax rate of only 11% in 2009
and 2010, far below the federally mandated 35%
corporate tax rate.
And that's not all. Despite their bleak performance
this year, the nation's top six banks paid out $144
billion in bonuses and compensation for 2011, second
only to the record $147 billion they paid out in 2007
at the height of the economic boom.
While banks enjoy record profits and the prospect of
total immunity, millions of Americans are drowning in
Everyday people are already out front, fighting against
the malfeasance of the banks; the White House should
stand with them. Our national leaders need look no
farther than Atlanta, GA, for an instructive profile in
courage. Earlier this month, a community church in Dr.
Martin Luther King's old neighborhood refused to be
ignored. In 2008, a tornado devastated the historic,
108-year-old Higher Ground Empowerment Center church,
and they were forced to take out a loan to cover
repairs. The loan went underwater and became harder and
harder to pay back. For nearly four years, the church
asked the bank to modify their loan, but BB&T bank
ignored them. Instead, last week, the bank started to
evict the church. Sound familiar? Anyone with an
underwater mortgage can tell you: banks these days just
can't seem to treat their own customers with decency
However, after Occupy Atlanta staged a high-profile
press conference, and 65,000 people signed a national
petition by Rebuild the Dream, the church got BB&T bank
to agree to modify their loan to something affordable
This happy ending is, unfortunately, the rare
exception. BB&T, after being shaken to their senses
(and shamed in the media), came to the table and did
the right thing. But millions of homeowners have no way
to stage protests and press conferences. Abuse, fraud,
conflicts of interest, and lawlessness have been
endemic at every stage of the mortgage origination and
foreclosure process. This chain of misconduct by many
of the nation's largest financial companies is at the
root of the foreclosure avalanche and it's time to
demand a course of action that will resolve the current
crisis and create jobs in the future.
If these folks in Atlanta can show this level of
courage in standing up to a big bank, then certainly
Obama and state attorneys general can show the same
The banks got their bailout. Now we need a strong and
fair settlement to help Americans drowning in
Van Jones, President of Rebuild the Dream, is the
founder and former president of Green for All and
author of The Green Collar Economy. In 2009, he served
as the green jobs advisor in the Obama White House. Van
is currently a senior fellow at the Center For American
Progress, and also holds a joint appointment at
Princeton University, as a distinguished visiting
fellow in both the Center for African American Studies
and in the Program in Science, Technology and
Environmental Policy at the Woodrow Wilson School of
Public and International Affairs.
George Goehl is the Executive Director of National
People's Action, a network of metropolitan and
statewide community organizations dedicated to
advancing economic and racial justice.
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