Kaptur Takes on Foreclosures
Before President Bush left office, Representative Marcy Kaptur visited then-Treasury Secretary Henry Paulson Jr. and presented him with a list of all of the people in her district whose properties had been foreclosed. Although each page included four columns of names, the full list still stretched all the way down the steps of the Treasury Building to the street below when unfurled.
Kaptur was able to get the administration to form a task force composed of representatives from several agencies who were supposed to work with local stakeholders to address the foreclosure crisis.
"They came from all the agencies, and they talked," she says. "It was like a car with four wheels and they are all going in a different direction. They were nice people and then they all left. So that task force didn't really accomplish anything."
In contrast, Kaptur hasn't relented in her fight.
Two months ago, at a hearing on how minority populations are coping with the financial meltdown, she distinguished herself with a laser-like focus on the foreclosure crisis. She was interested in the ability of state attorneys general to share information with one another when investigating banks for mortgage fraud. She discussed her efforts to increase the number of federal prosecutors and agents working on the issue. Above all, she wanted justice for victims of predatory lending and deceptive mortgage practices.
Since then, in addition to a starring role in Michael Moore's Capitalism: A Love Story (and the filmmaker's endorsing her for a presidential ticket in an interview with Nation columnist Naomi Klein), Kaptur has continued to advocate for homeowners and those who have lost their homes, and taken Congress and the administration to task for failing to act boldly to help those who are struggling.
I recently spoke with her about her fight, valuable lessons learned during her twenty-seven years serving in Congress, and the prospects for broad financial reform.
Greg Kaufmann: Tell me about the importance of an amendment you tried to introduce--to the Commerce-Justice-Science appropriations bill in June--regarding agents and prosecutors investigating mortgage fraud.
Rep. Marcy Kaptur: Mortgage fraud is at the heart of the housing crisis, which is at the heart of the financial crisis. After 9/11, the FBI redeployed financial special agents to anti-terrorism, but they have yet to replace those agents in the White Collar Crime Division--even though the division had warned in 2004 of the threat of a mortgage fraud "epidemic." We were under the understanding that [the Department of] Justice was under 200 prosecutors and investigative agents in the area of mortgage and securities fraud, and so we were pushing to increase that number. Our goal was 1,000 agents--we didn't come anywhere near close to that--but 1,000 agents is the number that were in place during the savings and loan crisis back in the late eighties. So our idea was to try to ratchet up the number. We got a couple dozen more agents in the bill with the promise of the chairman to try to work on this in conference [with the Senate]. The bill hasn't gone to conference yet so the House side hasn't yet been able to expand the number of agents.
Since then, you've tried repeatedly to find out from the FBI about how many agents are working on this issue and where they are assigned. Have you been able to get a straight answer?
Now they're telling us they have over 400 agents. But of course they say they are involved in corporate fraud, securities fraud, mortgage fraud. Our goal is to get a very clear understanding of additional hires--not just talk--but actual bodies in place. They're saying, "Well, you know it's very complicated, because corporate fraud bleeds over into mortgage fraud, bleeds over into securities fraud, and so forth." But our goal is to get 1,000 specifically in the area of mortgage fraud and securities fraud. And now is nowhere close.
You've introduced your own bill--while you're waiting for the House and Senate to conference on the appropriations bill--with similar goals?
Yes. HR 3995 would authorize the Department of Justice to hire 1,000 additional agents, prosecutors, and forensic experts. So we would not just have the securities and mortgage fraud people--that would be the 1,000--but we would also add forensic experts and investigators at the SEC. It's interesting to me that yesterday Attorney General Eric Holder announces he's now got this task force he is forming--
Yes, a new financial fraud task force. I wanted to ask you about that.
Well that is so interesting. And my question, I said to my staff, 'How many more people?' Are these moving boxes? Is this like the walnut shell game? You know--same people, no additional money, just--it looks good on a press release?
There were no details about this task force initially provided. Have you been able to get any information about it?
No. In fact we have tried repeatedly to get information from them on how many agents are now working on mortgage fraud, where they are assigned, what their budget is, etc. And the answers back lack clarity.
Since we don't know what they are doing with that task force--in the meantime, we've got your good legislation. Do you have any sense of a timeline with that? Will it get a hearing?
We would certainly hope so. It wouldn't be this year, it would be early next year. We hope [Judiciary Committee Chair] John Conyers will do that.
You've had a real focus on the fight to stem foreclosures. Two million Americans have already lost their homes to foreclosures, and there is no sign that the tide is letting up. What's the reason for the snail's pace on these mortgage modifications?
I think because the companies in charge are making far too much money by not doing anything. They benefit by holding the properties, by servicing fees, by tax benefits, even on property value losses, so it's to their advantage to not settle.... I know that the auction houses that came through our area to buy up these properties for pennies on the dollar, were hired by the big banks. It's just horrible.
You've been very outspoken that when people are being foreclosed on they shouldn't vacate unless the bank produces the mortgage. It's called the "produce the note" movement.
We have talked about this for so long now and it's finally starting to sink in. I heard another [Congress]member say yesterday--using different terms than I use--she said, "We've got to get information out to people that if they're being foreclosed, that they have legal rights, and they shouldn't vacate their property until the servicer or bank is able to demonstrate that they have the proper paperwork." And I thought--what do you think I've been talking about? Where have you been? So it just shows you how long it takes to break through consciousness. And, by the way, these individuals I'm talking about were on the Judiciary Committee.
Sadly, yes. (laughs)
A lot of progressives have also pinned their hopes on bankruptcy reform--judges being able to modify mortgages. The House passed that, the Senate didn't. But you've said that even if it were to pass, you're not happy with the burden it places on the individual in contrast to the banks.
That's right. Because it assumes--I mean, think about this: we bail out the wrongdoers with taxpayer money.... So [financial firms] get rewarded for their imprudence, but the homeowner gets to have on their credit record forever that they went bankrupt. What kind of a deal is that? It seems to me they ought to be held harmless if there was wrongdoing by the institution--in predatory lending, deceptive loan practices, fraud. What troubled me about the bankruptcy alternative that some of the folks up here were offering was that I would have much rather to have seen a rent-to-own program embarked upon. A more aggressive fair housing program so that people could get advice to hold onto their properties, and negotiate, rather than say, "Oh let's just send them down to bankruptcy, shoot, that'll solve it." It was a cruel answer. Why doesn't JP Morgan have to go bankrupt? Why doesn't Goldman Sachs have to go bankrupt? Wells Fargo? HSBC? Bank Of America? Citigroup? Why don't they go bankrupt? They don't want to do that. We came to the taxpayer to bail them out and yet they tell the taxpayer, "No, you go bankrupt." It's out of kilter, isn't it?
You mentioned rent-to-own programs. I believe that's also something you've been pushing recently, right? That we could keep people in their homes by renting to them rather than foreclosing?
We have had in the past, through HUD...lease-to-own alternatives where an individual--even sometimes with a low down payment--if they can maintain a monthly payment for a number of years, let's say five years. Then after that five years their payments turn into equity and we can put them on a path to homeownership rather than having all these people misplaced from their homes all over the country. Huge amounts of housing stock, abandoned, deteriorating, poorly managed by these big banks. What good does that do? We've driven our property values down between 10 and 20 percent already.
And this would be an alternative not only for vacant units but for people currently going through foreclosure, right?
Absolutely, because if you look at what's happened with this vicious cycle that begins with, let's say, JP Morgan handing over vacant houses to brokerages. What they do is they come in, they hire an auction house, and they come in and they take an $85,000 home and they sell it for $35,000. For $35,000 you could put the original family back in there.
It's just unconscionable, to say the least, isn't it?
Yes it is. They're pushing all of their wreckage on the individual homeowner who has no lawyer, who feels terrible anyway about all this, and you've got these big, giant institutions. I mean, how much is JP Morgan worth? Is it trillions? It's hundreds of billions--probably trillions, at this point. All of this battery of attorneys. All of these fancy-footwork people. And here you've got this little homeowner down there on Main Street somewhere in America, they got nobody to represent them. It's not a fair fight.
Could mandatory mediation program like the program in Philadelphia be implemented on a national scale, if there were the political will?
I wish. I think local judges really have to embrace this, and the local courts. So when the legislative branch is frozen, the judicial branch can do something. And I think in Philadelphia they've really found a way to do that. But it should be replicated. I guess we could try to fund court support--maybe through our fair housing agencies or something to lend them a little support around the country--but that Philadelphia example is very, very aggressive and apparently effective.
You've also called for a flat-out moratorium on foreclosures. Is it on the table?
I don't think people are thinking about that very much. But we are moving into some pretty cold winter months in some of these places. And the president had called for that last year and then--the moratorium ended, and he hasn't called for it again. But the programs the housing programs that were passed to try to deal with the situation have been totally ineffective. So the problem hasn't gone away.
When you look at accountability for predatory lending, deceptive practices, etc., another important development is the mortgage investigation announced by the Oversight and Government Reform Committee you serve on. What are your hopes for that investigation and what are its limits?
I would say the limits are that the Committee has so many different topics that it gets into, sometimes this gets sidetracked. Like today we were into how was the stimulus money spent. Earlier in the week we were into Bank of America. And the issue of predatory lending, of fraud, of behavior of these institutions in the mortgage market, is, well--[laughs]--we have a richness of topics on that committee, and sometimes it just gets shoved to the side, because of these other topics. But it's very, very important to keep the focus on the mortgage mess because that's what triggered the economic recession.
You've mentioned a lack of focus in the past--how Congress is dealing with tangential issues rather than that heart of the financial crisis.
It's almost like a three-ring circus. You keep people busy on the outer rings so they don't see the inner ring.
So taking on derivatives, or the foreclosure crisis--there has been nipping at the edges while the problem persists?
While the problem gets worse, right.
How do you see FDR's response to the Depression as compared to the actions of this administration and Congress?
It just seems that we are burdened by our own complexity. When Roosevelt was president, within three months because of a man named Harry Hopkins, hundreds of thousands of young people and others were employed through the Civilian Conservation Corps. In three months. They were able to figure out how to do that. Now we are into month eleven, and only 22 percent of the recovery money is spent, according to what they said at this morning's hearing. But you don't see the same kind of aggressiveness on the jobs front that Roosevelt seemed to be able to achieve within the bureaucracy.
And what about the foreclosure and reform fronts?
[FDR] had set up the Home Owners' Loan Corporation. They put all of the troubled loans into that. There was an aggressiveness and an immediate responsiveness, and to me--in contrast to helping people--thus far what's happened is Wall Street's been helped tremendously. They've got some of the biggest profits in history, while the rest of the country's going down the tubes. And, I can't believe Roosevelt--I mean, he would never have let that happen. He had a focus on Main Street. He understood Wall Street. His advisers understood it. They understood its power, and they used their own power to help the American people. And that's what I don't see happening here. I see enormous delay, I see lots of obfuscation, I see lots of press releases. But I see more joblessness and I see more foreclosures. And I don't see the dispatch with which Roosevelt worked to try to stem the bleeding.
Can this administration be true partners and allies in this fight, or are they an obstacle?
Well, I really think some of the president's generals need to go. I think that the economic advisory team is very, very poor. And in the housing arena--[HUD Secretary] Shaun Donovan gets all these plaudits, but the way I see it the mortgage mess is worse now than ever. And something is fundamentally wrong, because they are not aggressively dealing with the housing--and I think the reason is because I think they made the decision that the losses are going to be on the people, and that they're not going to make an effort to resurrect as many of these troubled loans as possible. I think that they have decided that Wall Street will be rewarded and Main Street will be penalized. I don't agree with that but I think that's the decision--that's the way it looks to me.
You've been in Congress for twenty-seven years now. You know this place as well as anybody. How do you perceive the power of these financial institutions in Congress and is it different from when you first came?
It's even worse. It was bad enough when I got here and what I've seen happen over the years is they've just gotten larger, and there's more concentration in the financial system. Every few years another bailout by the federal taxpayer of some of their wrongdoing--whether one looks at the peso crisis after NAFTA's passage, Long-Term Capital Management, Enron, and before that the savings and loan mess. And now this. Every single decade it just gets worse, and they keep getting away with it.
That brings me to my next question. How do we compete for reforming "too big to fail" institutions, creating a real Consumer Financial Protection Agency--all of these great ideas that the financial institutions lobby against?
We have to break them up. We have to have more competition in this industry. And we have to reward the institutions that behave well and prudently. And we are not doing that. We are looking through the wrong end of the telescope. For many years I have introduced campaign finance reform bills to separate any question that the public might have between private fundraising and public service. And these financial interests have just become even more powerful. They're now the largest givers to both presidential and congressional campaigns overall. They are able to lock this place down.
Barring campaign finance reform, how do we compete with these lobbyists now? How can citizens make ourselves heard and have an impact?
I think you have to be very, very clear on what it is that we are trying to do legislatively. So, for example, with 1,000 agents for the FBI. That's a clear goal we can achieve. That's achievable. If we talk about a rent-to-own program for these vacant units. If the outside groups organize and they identify that as a priority and just keep pushing on that, I think we can be successful. I think the overall reform--we'll get something. I heard today [Representative] Paul Kanjorski just got an amendment through to help break these ["too big to fail" companies] up. If that survives I'll be the most surprised person in the world. But you can try to support major reforms that limit the power of these organizations to do future damage and to create a more competitive system.