Last time force was used on the banks, remember, was when Henry Paulson (desperate) and George Bush (ditto) forced Wall Street into single conference room at, I guess, Treasury and forced them to accept bailouts. This took place three months before Obama became the new president.
The chief executives of the nine largest banks in the United States trooped into a gilded conference room at the Treasury Department at 3 p.m. Monday. To their astonishment, they were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry M. Paulson Jr. said they must sign it before they left.
The chairman of JPMorgan Chase, Jamie Dimon, was receptive, saying he thought the deal looked pretty good once he ran the numbers through his head. The chairman of Wells Fargo, Richard M. Kovacevich, protested strongly that, unlike his New York rivals, his bank was not in trouble because of investments in exotic mortgages, and did not need a bailout, according to people briefed on the meeting.
But by 6:30, all nine chief executives had signed — setting in motion the largest government intervention in the American banking system since the Depression and retreating from the rescue plan Mr. Paulson had fought so hard to get through Congress only two weeks earlier. ...What happened during those three and a half hours is a story of high drama and brief conflict, followed by acquiescence by the bankers, who felt they had little choice but to go along with the Treasury plan to inject $250 billion of capital into thousands of banks — starting with theirs. ...NYT 10/18/08
That's right, forced. Now it's Obama's turn. He doesn't have Paulson; he has Schneiderman. If you'll remember, the states' attorneys general rather than the Justice Department have been, again, most forceful in their desire to administer justice to the banks when it comes to bank skullduggery in lending. Eric Schneiderman, New York state's Attorney General, will head a federal-state task force. This is an interesting choice since Schneiderman has also been very vocal in his criticism of the "attempt, led by federal officials, to reach a settlement between state attorneys general and the large banks on foreclosure abuses."
Now it becomes a matter of whether this is a sincere effort or a kind of arms-length political move on the part of the Obama administration, a ploy to look 99-ish during an election year. None other than the AG of Delaware, son of the vice president, questions the deal.
Officials said the unit would most likely focus on Wall Street firms, big banks and other entities that many people thought had escaped scrutiny for their role in the housing crisis. The task force will most likely follow the lead of New York and Delaware, which are investigating potential flaws in the creation of mortgage-backed securities that could lead to charges of tax evasion, insurance fraud and securities fraud.
The Delaware attorney general, Beau Biden, has not yet signed on to the new effort. “We are willing to work with any agency that has the same interest in pursuing accountability in the mortgage finance industry,” said Ian McConnell, the director of Mr. Biden’s fraud division, which has joined forces with other states to pursue their own mortgage-related cases. “But any collaboration has to be real and meaningful.”
With only a year left in the president’s term, the task force also has a limited amount of time to produce results. ...NYT 1/25/12
Should we have confidence this task force?
There are reasons to be wary. Some of the federal officials who will also be involved with the investigation — including Eric Holder Jr., the United States attorney general, and Lanny Breuer, the leader of the Justice Department’s criminal division, who will be a co-chairman — have not distinguished themselves in the pursuit of mortgage fraud.
To win and retain public trust, both the administration and all the group’s co-chairmen — there are also four other officials from the Justice Department, the Securities and Exchange Commission and the Internal Revenue Service — must agree on several steps immediately.
The administration must ensure that the group has ample resources. The co-chairmen must hire a tough-as-nails prosecutor with a successful track record in financial fraud to drive the investigation forward. And the group must move quickly and vigorously, issuing subpoenas and filing cases. It is not starting from scratch; various agencies have all had separate investigations under way.
President Obama’s credibility is on the line. To restore public faith in the financial system, nothing less than a full investigation and full accountability will do. ...NYT editorial 1/26/12
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