It’s a Mad, Mad, Mad, Mad Mortgage Investigation

There was this marvelous photo taken on Jan. 27 at the Department of Justice. It’s the press conference where Attorney General Eric Holder announced the formation of a joint task force charged with investigating "an era of recklessness that hurt so many Americans," to quote a phrase used by President Obama a few days earlier in his State of the Union address.

At the podium stood New York Attorney General Eric Schneiderman, his face expressive, his body language transmitting an "I’ll take charge" sensibility. To his right stood Housing and Urban Development Secretary Sean Donovan, staring at the New York AG, seemingly taciturn, with stiff upper lip, but projecting a hint of annoyance. Holder appeared on the opposite flank, eyes fixed on a distant point in the crowd, somewhat detached and distant. 

I couldn’t help visualizing little cartoon bubbles above each head, maybe with Schneiderman’s voicing a strident "We’re gonna clean house!" while Donovan’s meekly entreats, "I think I can, I think I can, I think I can really deliver that settlement." The bubble above the head of Holder, I’ll postulate, sports a resigned "Not really looking forward to this one…"

The only really happy camper seemed to be Schneiderman, who now seems to have snatched victory from the jaws of imminent defeat with the announcement that he’d be co-chairing the task force. Now he could damn the torpedoes and proceed with an investigation that would "hold those accountable who broke the law" (another quote from the President’s speech). Overnight his fortunes had changed. He had gone from rogue AG to golden boy. 

The President’s confidence in Schneiderman’s abilities and resolve were, to some degree, the qualities that had led to his being ostracized from the overwhelming number of other AGs who’d been in the Donovan/Geithner camp, pursuing a robo-signing settlement with five major banks.

It was a settlement fraught with problems from the start, exchanging $25 billion targeted for homeowner principal reductions for an offer to not pursue past wrongdoing by the bankers. The $25 billion pot seemed paltry to many critics in light of the damage done to so many millions of homeowners victimized by the practice of robo-signing.  Schneiderman, as lead player in a rogue "Gang of Four" group of State AGs, clearly didn’t want to buy into the "imminent" settlement that offered a "get out of jail free" card for potential perps.  The President, and his advisors, also seemed to have come around to the opinion that going easy on banks was too tough a sell in an election year where targets for the slings and arrows of popular discontent usually sport the faces of Wall Street bankers.  

Some of Mitt Romney’s ill conceived recent statements – "let foreclosures proceed," and "banks [sic] aren’t bad people" –  added weight to the President’s strategy of reinforcing and defining the lines of demarcation, with the Democrats occupying territory with the 99 percenters squared off against the Republicans huddling together with their uber-wealthy 1% supporters.

Jamie Dimon, CEO of JPMorgan Chase, sounded none too pleased about the change of circumstances.  He’d thrown his support and prestige behind Donovan’s idea of a settlement with immunity provisions. Speaking from a perch at the World Economic Forum in Davos, he told reporters that any change in terms would have the possibility of "derailing" the settlement altogether. He sounded a bit like the unhappy kid packing up his marbles and threatening to go home.

Some say that the President’s announcement of the new joint task force is simply a clever ploy to turn Schneiderman and his recalcitrant colleagues into prodigals who will soon return back to the fold inhabited by the other 46 AG’s and sign on to the robo-signing settlement.  However it seems that his "rogue" colleagues – California’s Kamala Harris, Delaware’s Beau Biden and Nevada’s Catherine Masto – remain unconvinced.

There seems to be a clock ticking. The Wall Street Journal reports that "negotiators" for the robo-signing settlement are giving states until Friday to sign on. There’s some evidence that the pot may have been sweetened for the consumer side by dropping some of the most egregious immunity provisions. Even that well-known Goldman slayer, Matt Taibbi, smells victory.  I’ll just wait and see.

With all the twists and backroom turns in this l’affaire robo-signing, the search for answers is beginning to look more and more like the quest for the hidden cash in Stanley Kramer’s 1963 comedy, "It’s a Mad, Mad, Mad, Mad World." In that movie, a cast of characters that include Spencer Tracy, Ethel Merman, Milton Berle and Jonathan Winters, among others, take to the road in a madcap dash to recover hidden loot.

I fear that the government officials seeking settlement and restitution from the banks and mortgage servicers will wind up much like the characters in the film. At the movie’s conclusion, they’re seen fleeing a burning building – now minus their ill-gotten gains – and leaping desperately to the top of a fire truck’s extended rescue ladder. As a large crowd watches from below, the accumulating weight causes the ladder to spin wildly out of control. As centrifugal force takes over, one by one they’re hurtled into space, landing bruised and battered with nothing to show for their efforts. At the close of the flick, as karma would have it, they’re shown in a prison dispensary nursing their wounds.

Will the results of all these investigations and settlements bring relief to the millions of Americans whose homes (and lives) are underwater, or who’ve already joined the foreclosed and dispossessed?  Will the investigators trying to kick over the robo-signing rocks simply stub their toes? Time will tell, but time isn’t what victims of the housing crisis have in abundance. 

Joel Sucher, a filmmaker with Pacific Street Films in Hastings-on-Hudson, N.Y., is working on "Foreclosure Diaries," a documentary about the financial crisis.