California Attorney General Harris Now
Signaling Willingness to Rejoin Foreclosure Talks
Posted: 07 Oct 2011 03:49 AM
PDT
Dave Dayen saw this one coming.
When Kamala Harris said she was not willing to participate in the so called “50
state” attorney general mortgage negotiations, he recognized Harris’ refusal to
join the New York attorney general Schneiderman’s group as a bad sign. Note that
the state of the talks is persistently misreported in the MSM as being only
Schneiderman, when Delaware, Massachusetts, Kentucky, Nevada, and Minnesota are
also out of the talks.
It is a safe bet that the
Democratic party has been muscling Harris since her defection last week. The
Administration is desperate to have the AGs provide legitimacy to their planned
“settlement as coverup” strategy. Not that it will be that effective in the end.
The threat of the two states where all securitization trusts are domiciled (New
York and Delaware) has the potential to undermine the value of any settlement,
particularly since New York has the potent weapon of the Martin Act. Merely
those two states moving forward (and remember, it is more than those two states)
has the potential to be extremely embarrassing to the Administration and the AGs
who continue to serve as human shields for the Administration.
But the belief appears to be that
even with this group pushing forward, nothing all that earth shattering will
happen prior to the 2012 elections. That is an awfully risky bet. The filings
this year by Schneiderman, Beau Biden, and Catherine Masto alone have provided
ample evidence of bank misconduct, and also provide ideas and cover for private
sector litigants (particularly investors, who are a very conservative bunch).
And any settlement will not restrict the rights of private plaintiffs, such as
aggrieved homeowners, to act.
Note that Harris’ body language is
ambiguous: she has only said she is would take a better deal from the banks if
she offered one, which merely means she is willing to negotiate with them
separately. So narrowly, this is just a reiteration of her position as of last
week. But this reaffirmation also opens the door to her rejoining the talks if
the banks make meaningful movement, and Reuters concurs with this
reading. I don’t see this happening (and neither does
Massachusetts AG Martha Coakley, as quoted in the Wall Street Journal account).
From the Journal:
California Attorney General
Kamala Harris, who dropped out last week from talks aimed at wringing a huge
settlement from banks accused of foreclosure abuses, remains open to a deal if
it involves “a stronger proposal” from lenders, according to a person familiar
with the situation….
Negotiators believe they can
still reach a broad-based settlement if enough states sign on and are able to
lure back others that have balked at certain terms…
But no agreement has been reached
on some of the most divisive issues, such as the extent to which banks should be
released from additional legal claims.
Yves here. This is why whether
Harris is in or out ultimately will not matter. There is no bargaining overlap
between what the banks want (a big release) and what a fair number of the AGs
are willing to give (a narrow release). Back to the article:
Ms. Harris’s decision to walk
away from the negotiating table last week has contributed to a sense of urgency
in the negotiations, said one person familiar with the banks’
thinking…
Obama administration officials
have worked behind the scenes for months to try to keep the process on track.
Some senior officials view a deal as an opportunity to widen the use of
principal reductions for underwater mortgages.
Yves here. The principal
reductions talk is PR. We’ve done the math before, and the dollars that the
assembled parties are likely to get will not allow for deep enough mods to
enough homeowners. They’d be better off applying it to writedowns of seconds and
mortgage counseling (or to Adam Levitin’s impish suggestion, funding Legal Aid).
The Administration seems
determined to keep up the belief that a settlement is imminent, which has been
the party line since January. Penelope was able to keep her suitors at bay for
20 years by, among other things, dragging out the weaving of her Odysseus’
burial shroud. I don’t think the Administration will prove to be that
resourceful.
