One of the most important questions to arise out of Washington over the past three years, and one that Democrats and defenders of the administration often dance around, is why big financial institutions haven’t been punished for their role in the mortgage crisis: for pushing bad loans beforehand and for engaging in shady foreclosure practices afterward. There has not been a single prosecution of a high-ranking executive nor Wall Street firm for playing a part in the meltdown.
Much of the analysis about the administration’s response to the global financial crisis focuses on the Dodd-Frank reforms, but that was a process in which the administration didn’t have total control—the legislation was subject to massive lobbying campaigns and horse-trading between members of Congress.
But the administration could have acted unilaterally to punish the big financial firms who helped create the crisis and push people out of their homes afterwards—and in large part, it hasn’t. We’ve noted before the pressure that the administration is placing on New York Attorney General Eric Schneiderman to join a wide-ranging settlement with major banks over dubious foreclosure practices—one that would ask the banks to pay the meager sum of $20 billion to homeowners and investors, while granting them immunity from further prosecution. (Schneiderman has not yet relented).
On 60 Minutes last night, Steve Kroft had an outstanding two-part piece that questioned why the Department of Justice has not pursued cases against big banks for pushing bad mortgages onto people in the run-up to the crisis, and lying to investors about the strength of those loans.
Lest the Department of Justice claim that it is doing its best and that there isn’t overwhelming proof of wrongdoing—which is actually just what Lanny Breuer, head of the Department’s criminal division, said during the piece last night—Kroft presented some awful damning evidence.
First he spoke with Eileen Foster, a senior executive at Countrywide Financial, the largest mortgage lender in the country. Foster was in charge of monitoring fraud at Countrywide—and found a whole ton of it:
Kroft: How much fraud was there at Countrywide?
Foster: From what I saw, the types of things I saw, it was—it appeared systemic. It, it wasn’t just one individual or two or three individuals, it was branches of individuals, it was regions of individuals.
Kroft: What you seem to be saying was it was just a way of doing business?
In 2007, Foster sent a team to the Boston area to search several branch offices of Countrywide’s subprime division—the division that lent to borrowers with poor credit. The investigators rummaged through the office’s recycling bins and found evidence that Countrywide loan officers were forging and manipulating borrowers’ income and asset statements to help them get loans they weren’t qualified for and couldn’t afford.