Editor’s Note: Each week we cross-post an excerpt from Katrina vanden Heuvel’s column at the WashingtonPost.com. Read the full text of Katrina’s column here.
This Thursday will mark three years since the collapse of Lehman Brothers, a defining moment of the financial crisis. Today, it’s clear that very few lessons have been learned from it by our political leaders or those on Wall Street; if any, the wrong lessons have been learned. But one conclusion, seared into the minds of ordinary Americans, is as clear as it is wrenching: The banks play by one set of rules and are held to one standard, while the rest of us are held to another.
In exchange for taking the global economy to the brink, the banks have received $700 billion of relief from TARP funds and $1.2 trillion in secret loans from the Federal Reserve, at no interest. It’s no wonder record profits—and record bonuses—returned so quickly. American homeowners, on the other hand, have been devastated. The crisis wiped out $16 trillion in household value, little more than half of which has been recouped. More than 25 percent of homeowners are underwater on their mortgages. The suffering has not subsided—and it won’t for many, many years.
It was compounded by the fact that the very banks causing it made it worse. After signing off on shoddy loans, putting Americans in homes they couldn’t afford, on terms they could barely understand, the banks began foreclosing on homeowners en masse, using what’s known as robo-signing. That procedure allows banks to process foreclosures faster by encouraging employees to use fake signatures to approve documents they don’t read.
An investigation was launched, exposing once again that the banks play by a different set of rules. And so in negotiations ongoing between banks and state attorneys general on mortgage relief, the agreement on the table is nothing short of a sweetheart deal.
The banks are being asked to pay just $20 billion dollars to homeowners and investors, a pathetically meager sum that represents only a fraction of the damage they caused. In exchange, the banks will receive immunity from any further investigation into what happened behind their closed doors in the run-up to—and aftermath of—the financial crisis they are responsible for.
The group of 50 state attorneys general charged with negotiating on behalf of people who lost their homes—the very officials who should be working to discover the full extent of the crimes and fraud perpetrated by the banks—are being asked, essentially, to give up and go away.
Instead of being met with outrage, with outright indignation over the notion that egregious acts will be swept under the rug, the settlement has been met with enthusiasm from the vast majority of state attorneys general. In instances they have been actively pushed by the Obama administration, which fears that state-by-state litigation will injure the banks. Only a relative few have stood firmly against the bank’s demands: chief among them, New York Attorney General Eric Schneiderman.
Schneiderman called the settlement “quick” and “cheap” and refused to sign off on it. Agreeing to it would deprive attorneys general of the opportunity to further investigate bank actions, something he could not stomach. “The key is that you don’t settle claims you haven’t investigated,” Schneiderman told me in a phone interview. The attorneys general overseeing the settlement still haven’t deposed a single witness, have not been provided with a single document and have not done anything that remotely resembles a real investigation. In return for his refusal to give in, Schneiderman was booted off the steering committee in charge of the negotiation.
Editor’s Note: Read the full text of Katrina’s column here.