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The three state attorneys general — Eric Schneiderman of New York, Catherine
Cortez Masto of Nevada and Beau Biden of Delaware — are now attempting to
build a new coalition and ideology, knit together by the concept of justice
that lies behind law and order.

What these law enforcement officers are doing is clearly popular with the
public, popular with real-economy interests — and unpopular with the
bank-dominated political elite.

As with the Wall Street protesters, it’s not clear where this road will
lead, how powerful it is or whether it is sustainable. But these justice
Democrats are trailblazing a new frontier. There are other politicians
around the nation also following this path. These politicians represent not
just a different set of tactics but a tentative new ideological direction
for the Democratic Party.


<http://www.politico.com/>

*Justice Democrats take on big banks*
By: Matt Stoller
October 3, 2011 09:31 PM EDT

If you look, you can find a few Democrats who have been staging their own
version of Occupying Wall Street. Three state attorneys general are now
taking a wrecking ball to the party’s key policy axis: the bank bailouts.
Each has pledged to investigate possible fraud in the securitization of
trillions of dollars of mortgages — and made significant legal moves that
suggest they are serious about doing so.

In the process, they have placed themselves squarely in the middle of a
multitrillion-dollar fight over the nature of the financial system and the
future of the Democratic Party.

In 2008, Barack Obama seemed to represent the party’s future — with his
legion of shiny young organizers, his multimillion-person email list and his
promise of structural changes to the political order. Today, his
administration looks tired and brittle, trapped among a surly country,
dissatisfied supporters, a still creaky banking system and a brutal
reelection climate.

But, in fact, Obama’s administration represents the endpoint of 40 years of
bank-friendly Robert Rubin-influenced ideology. The three state attorneys
general — Eric Schneiderman of New York, Catherine Cortez Masto of Nevada
and Beau Biden of Delaware — are now attempting to build a new coalition and
ideology, knit together by the concept of justice that lies behind law and
order.

What these law enforcement officers are doing is clearly popular with the
public, popular with real-economy interests — and unpopular with the
bank-dominated political elite.

As with the Wall Street protesters, it’s not clear where this road will
lead, how powerful it is or whether it is sustainable. But these justice
Democrats are trailblazing a new frontier. There are other politicians
around the nation also following this path. These politicians represent not
just a different set of tactics but a tentative new ideological direction
for the Democratic Party.

Traditionally, Democrats want to do good. But they do not want to fight
“bad” — because that risks the ire of powerful establishment interests.
Democrats since the 1970s have sought to find the common ground between
powerful financiers and the middle class. As the business elite accumulated
more and more of the national wealth, this deal became untenable. One reason
that Obama’s favorability numbers are now less than 50 percent might be that
he is seeking common ground where, increasingly, there is none.

Like President Bill Clinton before him, Obama and his team believe in
deregulation and are continuing a “let them eat cake”-style social contract
that solidified during Ronald Reagan’s presidency. As this contract has
fallen apart, so has the strong coalition behind Obama’s presidency.

We haven’t seen a challenge to the bank-friendly Democratic orthodoxy for 40
years. The progenitor of this modern Democratic Party was Jimmy Carter.
Though Reagan and Clinton helped finish the job, it was Carter who began
wholesale deregulation of the banking industry — as Jeff Madrick details in
his new book, “The Age of Greed.”

In signing the landmark Depository Institutions Deregulation and Monetary
Control Act of 1980, which lifted usury caps, Carter said, “Our banks and
savings institutions are hampered by a wide range of outdated, unfair and
unworkable regulations.”

Carter, Clinton, and Obama organized much of their policymaking around the
needs of big banks — with intellectual firepower provided by Rubin and
then-Federal Reserve Chairman Alan Greenspan. Indeed, Rubinites still
dominate Democratic policymaking — Larry Summers, Jason Furman, Treasury
Secretary Timothy Geithner, Gene Sperling are all Rubin acolytes. Jack Lew,
the current Office of Management and Budget director, is from Citigroup;
Peter Orzag, the former OMB director, went to Citigroup. White House chief
of staff Bill Daley is a JP Morgan man. At least part of their power comes
from their gold-plated credentials.

Schneiderman, Biden and Masto, however, are knitting together a new
political coalition. They recently began investigating foreclosure fraud and
mortgage securitization.

Schneiderman, an unabashed liberal, issued subpoenas and intervened in the
deal sought by Bank of America to put possible fraud at Countrywide behind
it. Biden joined him. Since nearly all trusts are Delaware or New
York-based, this is a powerful duo of state law enforcement officials.

Masto has gone further, filing a civil suit against Countrywide/Bank of
America that accuses the bank of fraud from origination of mortgages through
foreclosure. Her state has been among the most hard hit by the housing
bubble. She unleashed a stinging accusation in her complaint, suggesting
that mortgage origination during the boom was so poorly done that major
banks do not have the right to foreclose on the properties against which
they lent money. She has also indicated indictments are coming.

There are other politicians following this path. Jefferson Smith, a Oregon
state representative now running for mayor of Portland, successfully fought
legislation to make foreclosures easier in that state. Register of Deeds
Jeff Thigpen in North Carolina took on banking interests by fighting
foreclosure fraud. Maryland Rep. Elijah Cummings has been dogged in his
investigations of mortgage servicers.

The backlash has been intense. When Schneiderman accused Bank of New York
Mellon of “fraudulent and deceptive conduct” in its role as a trustee for
mortgage-backed security vehicles, he drew criticism from both Housing and
Urban Development Secretary Shaun Donovan and New York Fed Board member
Kathryn Wylde. She openly attacked Schneiderman, despite her position at the
powerful central reserve bank in New York. But thousands of citizens
contacted his office to encourage him to stand strong.

When Obama ally Tom Miller, the Iowa attorney general, threw Schneiderman
off the task force that was attempting to reach a settlement with big banks
on their improper handling of foreclosures, newspaper editorials across the
nation weighed in to back Schneiderman. Even former Sen. Al D’Amato (R-N.Y.)
praised him.

Biden is facing his own backlash. Delaware Gov. Jack Markell wrote a letter
to the National Association of State Attorneys General implicitly
criticizing Biden’s investigation for “prolonging an economic climate that
has left millions of Americans jobless.” Markell insisted, “To get our
nation’s economy moving again, we need a strong and vibrant financial
services industry.”

Yet there is a shrewdness behind these justice Democrats: strategy. These
big banks have now developed powerful enemies — like the investors who were
ripped off during the bubble, hedge funds forced to interact with powerful
banking leaders and real estate developers and others in the real economy
who have seen capital frozen and destroyed by executives at bloated big
banks.

The question is whether these politicians can survive the ugly and withering
attacks heading their way.

The problem facing the Obama administration and its supporters is — as with
the Bush administration — that the public view differs starkly with their
version of events. Though the Obama administration has stopped most attempts
at constraining the behavior of big banks, the economic damage they have
already caused is too big to deny or hide.

The banks’ mishandling of trillions of dollars of mortgages has prompted
lawsuits across the country over whether banks are legally foreclosing on
homeowners. For example, Thigpen, in North Carolina, found thousands of
fraudulent documents filed by banks. This level of activity is what
economist Bill Black calls a “criminogenic environment.”

The Obama administration sought to paper over the problems, first with
Attorney General Eric Holder’s policy of making certain crimes “too big to
prosecute”; second, by encouraging state attorneys general with jurisdiction
over foreclosures to accept a paltry sum and that banks’ promise to behave
better. Dissidents in the regulatory community, like Sheila Bair or
Elizabeth Warren, were overruled or outwaited.

Most attorneys general, with few resources and little expertise in financial
crimes, acceded. And most banking regulators, with the exception of the
rogue Federal Housing Finance Agency, which is now suing big banks for
billions of dollars over fraudulently securitized mortgages, went along.

But the creaky financial system and the collapsing housing market simply
cannot be defeated with bureaucratic intrigue.

Ronald Suskind’s new book, “Confidence Men,” offers a substantial
revisionist historical analysis — alleging that it was presidential
advisers, not Obama, who decided on the country’s financial policy axis.

This is probably nonsense. Policy continuity from past administrations, as
well as the consistency of the policy framework across the government, would
imply that what this administration did had substantial partywide backing.

When historians look back at the Obama administration, they may find that
his most important initiative — and the one that may have doomed him — was
TARP, the Troubled Asset Relief Program. Obama, though not yet president
when it was signed, was the major force behind the legislation. He bet his
presidency on the notion that pushing government capital into the banking
system without imposing any real constraints would unlock lending — and
that, in turn, would unlock economic growth in time for reelection.

As the implications of this strategy became clear — huge banker bonuses and
millions of foreclosures — there was widespread grumbling. But congressional
Democrats dutifully passed the Dodd-Frank financial reform law anyway.

Over the past six months, however, this new group of Democrats finally said
“no” to the Obama administration, and the big banks. And the public is with
them.

It’s likely far too late for this rebellion to have any real impact on 2012.
But this rebellion, when paired with the protests springing up nationwide,
may ultimately affect the country in unexpected ways.

Matt Stoller worked on the Dodd-Frank financial reform law and Federal
Reserve transparency issues as a staffer for Rep. Alan Grayson (D-Fla.). He
is now a fellow at the Roosevelt Institute.


On Tue, Oct 4, 2011 at 4:11 PM, Alexander Snyder-Mackler <
smacklera@gmail.com> wrote:

> Can't paste the text from my bberry, but another winner:
> http://www.politico.com/news/stories/1011/65004_Page2.html
>
> --
> Alexander Snyder-Mackler
>


--

Alexander Snyder-Mackler
(302) 598-867