It’s become a stale joke about the Obama administration. Every time a demand is made for the White House to take decisive action on an important issue . . . the President’s solution is always the same: Form a committee to study the matter.
In my last posting, I discussed the January 20 article written by Scot Paltrow for Reuters, which revealed that Attorney General Eric Hold-harmless and Lanny Breuer, head of the Justice Department’s criminal division, had been partners in the Washington law firm, Covington & Burling. As Scot Paltrow pointed out, during the years while Holder and Breuer were partners at Covington, the firm’s clients included the four largest U.S. banks – Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co.
Less than a week after publication of Paltrow’s report, which raised “conflict of interest” questions concerning Holder’s reluctance to prosecute banks or mortgage servicers for fraudulent foreclosure practices, President Obama delivered his State of the Union address. With Paltrow’s revelations still fresh in my mind, I was particularly surprised to hear President Obama make the following statement:
And tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.
If it weren’t bad enough that critics had already been complaining about the Attorney General’s failure to prosecute mortgage fraud cases, Obama has most recently appointed Holder to supervise “investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis”. It’s hard to avoid the assumption that those “investigations” will lead to nowhere. By Wednesday, I found that I was not alone in my cynicism concerning what is now called the Office of Mortgage Origination and Securitization Abuses.
Wednesday morning brought an essay by Yves Smith of Naked Capitalism, in which she expressed dread about the possibility that New York Attorney General Eric Schneiderman may have been seduced by Team Obama to join the effort exerting pressure on each Attorney General from every state to consent to a settlement of any and all claims against the banksters arising from their fraudulent foreclosure practices. Each state is being asked to release the banks from criminal and civil liability in return for a share of the $25 billion settlement package. Ms. Smith compared that initiative with Obama’s most recent announcement about the Office of Mortgage Origination and Securitization Abuses:
So get this: this is a committee that will “investigate.” . . . Neil Barofsky, former prosecutor and head of SIGTARP, doesn’t buy the logic of this committee either:
Neil Barofsky @neilbarofsky
If task force created either b/c DOJ hasn’t done an investigation, or b/c 3-yr investigation a failure, how does Holder keep his job?
A lot of soi-disant liberal groups have fallen in line with Obama messaging, which was the plan (I already have the predictable congratulatory Move On e-mail in my inbox). Let’s get real. The wee problem is that this committee looks like yet another bit of theater for the Administration to pretend, yet again, that it is Doing Something, while scoring a twofer by getting Schneiderman, who has been a pretty effective opponent, hobbled.
If you wanted a real investigation, you get a real independent investigator, with a real budget and staffing, and turn him loose. We had the FCIC which had a lot of hearings and produced a readable book that said everyone was responsible for the mortgage crisis, which was tantamount to saying no one was responsible. We even had an eleven-regulator Foreclosure Task Force that looked at 2800 loan files (and a mere 100 foreclosures) and found nothing very much wrong.
Neil Barofsky’s question deserves repetition: Why does Attorney General Eric Hold-harmless still have his job if – after three years – the Justice Department has taken no action against those responsible for originating and securitizing the risky mortgages which led to the housing crisis?
David Dayen of Firedoglake weighed-in with his own skeptical take on Obama’s purported crakdown on mortgage origination and securitization abuses:
First of all, this becomes part of a three year-old Financial Fraud Task Force which has done approximately nothing on Wall Street accountability outside of a few insider trading arrests. So that’s the context of this investigative panel, part of the same entity that has spun its wheels. Second, the panel would only look at origination, where there have been plenty of lawsuits and where the main offenders are all out of business, and securitization, which may aid investors (that includes pension funds, of course) but not necessarily homeowners. . . .
Given the fact that this is an election year, President Obama knows that mere lip service toward a populist cause will not be enough to win back those disgruntled former supporters, who have now learned – the hard way – that talk is cheap. Obama is now going the extra mile – he’s forming a committee! Trouble is – those disgruntled former supporters have already learned that committee formation is simply the disingenuous “follow-through” on a false campaign promise. Nice try, Mr. President!
Recession Watch
A recession relapse is the last thing Team Obama wants to see during this election year. The President’s State of the Union address featured plenty of “happy talk” about how the economy is improving. Nevertheless, more than a few wise people have expressed their concerns that we might be headed back into another period of at least six months of economic contraction.
Last fall, the Economic Cycle Research Institute (ECRI) predicted that the United States would fall back into recession. More recently, the ECRI’s weekly leading index has been showing small increments of improvement, although not enough to dispel the possibility of a relapse. Take a look at the chart which accompanied the January 27 article by Mark Gongloff of The Wall Street Journal. Here are some of Mr. Gongloff’s observations:
Economist John Hussman of the Hussman Funds has been in full agreement with the ECRI’s recession call since it was first published. In his most recent Weekly Market Comment, Dr. Hussman discussed the impact of an increasingly probable recession on deteriorating stock market conditions:
Another fund manager expressing similar concern is bond guru Jeffrey Gundlach of DoubleLine Capital. Daniel Fisher of Forbes recently interviewed Gundlach, who explained that he is more afraid of recession than of higher interest rates.
Many commentators have discussed a new, global recession, sparked by a recession across Europe. Mike Shedlock (a/k/a Mish), recently emphasized that “without a doubt Europe is already in recession.” It is feared that the recession in Europe – where America exports most of its products – could cause another recession in the United States, as a result of decreased demand for the products we manufacture. The January 24 World Economic Outlook Update issued by the IMF offered this insight:
On January 28, Steve Odland of Forbes suggested that the Great Recession, which began in the fourth quarter of 2007, never really ended. Odland emphasized that the continuing drag of the housing market, the lack of liquidity for small businesses to create jobs, despite trillions of dollars in cash on the sidelines, has resulted in an “invisible recovery”.
Jennifer Smith of The Wall Street Journal explained how this situation has played out at law firms:
Regardless of whether the economic recovery may have been “invisible”, economist Nouriel Roubini (a/k/a Dr. Doom) has consistently described the recovery as “U-shaped” rather than the usual “V-shaped” graph pattern we have seen depicting previous recessions. Today Online reported on a discussion Dr. Roubini held concerning this matter at the World Economic Forum’s meeting in Davos:
In a December 8 interview conducted by Tom Keene on Bloomberg Television’s “Surveillance Midday”, Lakshman Achuthan, chief operations officer of the Economic Cycle Research Institute, explained his position:
I’m afraid that we might know the answer before then.