Posted on Monday, October 18, 2010
Amid a rising uproar over slipshod bank foreclosure practices, members of the Obama administration on Sunday expressed anger about the revelations, but urged caution as multiple investigations into the crisis unfold.
In a piece posted on the Huffington Post Web site, Shaun Donovan, the secretary of the Department of Housing and Urban Development, wrote: “The notion that many of the very same institutions that helped cause this housing crisis may well be making it worse is not only frustrating — it’s shameful.”
But, he added, “a national, blanket moratorium on all foreclosure sales would do far more harm than good, hurting homeowners and home buyers alike at a time when foreclosed homes make up 25 percent of home sales.”
It was the second effort in two weeks by the administration to deflect pressure for a national moratorium on foreclosures. In televised comments last Sunday, David Axelrod, a senior White House adviser, urged moderation, saying there were foreclosures with valid documents “that probably should go forward.”
Given the outrage over the foreclosure revelations in the last two weeks, the administration’s comments Sunday sounded like an appeal for calm and restraint. They may also signal an attempt to defuse the potential for a party rift on the issue. Some Democratic leaders, including Harry Reid, the Senate majority leader from Nevada, have supported a nationwide moratorium.
On Wednesday, all 50 state attorneys general promised to conduct their own inquiries into foreclosure abuses, which center on accusations that banks cut corners in a rush to get signatures on thousands of documents required for the proceedings.
That move came after a number of the country’s largest banks announced partial or total halts to foreclosures. Bank of America last week announced a moratorium on foreclosures in all 50 states, while JP Morgan Chase halted action in 41 states.
With no clear idea of the financial implications of this legal morass, bank stocks have swooned. Shares in Bank of America, for example, were off by 9.1 percent last week. Some analysts have suggested that Bank of America failed to set aside enough money to cover any number of potential liabilities — including buying back loans that were not appropriately processed — raising the prospect that it and other banks could face bigger losses related to foreclosure transactions.
As the foreclosure abuses have come to light, the Obama administration has resisted calls for a more forceful response, worried that added pressure might spook the banks and hobble the broader economy. But members of the administration who weighed in on the subject on Sunday signaled that there were no plans to alter their tone or tactics.
In an interview on C-Span, the chairwoman of the Federal Deposit Insurance Corporation, Sheila C. Bair, suggested the fallout from this issue might not be as severe as many now predict.
“If it turns out this is just a process issue, then I don’t anticipate the exposures to be significant,” she said on “Newsmakers.”
“If it turns out to be something more fundamental, then we’ll have to deal with that,” she said. “But I think we need to get all the information before we jump to any conclusions.”
The full extent of the foreclosure mess is still coming into focus. Congress has called for a hearing on the subject, and the housing market in certain parts of the country has come to a near standstill.
The officials on Sunday stopped short of announcing a criminal investigation, and did not suggest that one was imminent. Instead, Mr. Donovan wrote that the Financial Fraud Enforcement Task Force — a coalition of federal agencies and United States attorney’s offices — has made the foreclosure issue “priority No. 1,” adding that Attorney General Eric Holder has said that if wrongdoing was discovered by the task force, it “will take the appropriate action.”
“Banks must follow the law,” Mr. Donovan wrote on The Huffington Post, “and those that haven’t should immediately fix what is wrong.”
If the goal of running the article in the Huffington Post was to win over converts among its liberal readership, it did not seem to work. “We don’t need a diagnosis, Einstein. We would like your department to do something about it,” wrote one reader in the site’s comments section.
Another said that the moment for stern talk had long since passed, writing, “The time to get tough was when it first became evident that the crash was caused by unconscionable greed and criminal fraud, misfeasance, malfeasance, and hubris on the part of Wall Street.”
David Segal Huffington Post