Obama’s latest housing market chicanery should come as no surprise. As we discuss below, he will use the State of the Union address to announce a mortgage “settlement” by Federal regulators, and at least some state attorneys general. It’s yet another gambit designed to generate a campaign talking point while making the underlying problem worse.

The president seems to labor under the misapprehension that crimes by members of the elite must be swept under the rug because prosecuting them would destablize the system. What he misses is that we are well past the point where coverups will work, and they may even blow up before the November elections. If nothing else, his settlement pact has a non-trivial Constitutional problem which the Republicans, if they are smart, will use to undermine the deal and discredit the Administration. [Continue reading…]

Yves Smith continues with a VERY good point: “ So if the Republicans were smart, they’d take advantage of a serious weakness in this deal: that it violates the 5th Amendment takings clause. I am told by Bill Frey of Greenwich Financial that a servicer safe harbor provision in HAMP, which was supposed to shield servicers from investor lawsuits over mortgage modifications, was passed by both the House and Senate but was removed in reconciliation because that provision would have run afoul of the 5th Amendment. This settlement is intended to have servicers engage in even more aggressive mortgage modifications and would thus seem to have precisely the same Constitutional problem.”

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If this was a “whether or not” balloon used to test the waters of how well it would be accepted –  it sprung enough leaks to deflate and bury it over the weekend.  Bill Moyers & Company’s segment on Crony Capitalism was outstanding. Talk about stunning information, David Stockman explains how the courtship of politics and high finance rewards the super-rich and corporations and Gretchen Morgenson turns the page with “Corporate Clout” in Washington – how money and political clout enriches big business.

DAVID STOCKMAN: “Money dominates politics. And as a result we have neither capitalism or democracy. We have some kind of — we have crony capitalism.”

GRETCHEN MORGENSON: “The big powered, moneyed institutions are in control in Washington, there’s no doubt about it. You and I don’t have a lobbyist and so we are not represented.”

Moyers opens the expose`stating, “Citigroup Replaces JPMorgan as White House Chief of Staff” discussing President Obama’s inner circle.

“President Obama may call them “fat cats” and stir the rabble against them with populist rhetoric when it serves his purpose, but after the fiscal fiasco, he allowed the culprits to escape virtually scot-free.

And when he’s here in New York, he dines with them frequently and eagerly accepts their big contributions.”  Click here to watch the full video.

BILL MOYERS: “The Bush administration came to the rescue of some of the county’s largest financial institutions, to the tune of 700 billion tax-payer dollars.”

DAVID STOCKMAN: “We elect a new government because the public said, you know, “We’re scared. We want a change.” And who did we get? We got Larry Summers. We got the same guy who had been one of the original architects of the policy in the 1990s, the financialization policy, the too big to fail policy.

Who else did we get? We got Geithner as Secretary of the Treasury. He had been at the Fed in New York in October 2008 bailing out everybody in sight. General Electric got bailed out. Morgan Stanley, Goldman Sachs, all of the banks got bailed out, and the architect of that bailout then becomes the Secretary of the Treasury. So it’s another signal to the financial markets that nothing ever changes. The cronies of capitalism are in charge of policy.”

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BILL MOYERS: “Why should middle class people on Main Street care about how banks are regulated? What difference does it make to them?”

GRETCHEN MORGENSON: “It makes a tremendous difference, Bill, because it affects every part of their lives. When they have to pay higher fees to get access to their money that’s a cost they can ill afford. When banks are luring them into loans that are poisonous and toxic, that are designed to make the bank money and designed not to help the borrower, that is a real concern.”

GRETCHEN MORGENSON: “It could not be more important to rein these institutions in because they affect every piece of your life. They affect your retirement, they affect your everyday expenses, whether you can put food on the table for your family. They permeate your life, and so the degree to which they are making it more onerous to borrow is a huge — has huge consequences.” […]

BILL MOYERS: “Which brings me to what you described in your column at the end of last year, the ugliest paradox of the financial crisis which you say became clear in 2011.”

GRETCHEN MORGENSON: “Well, as you know, Bill, we’re only really starting to learn the full extent of what went on during the mortgage boom. But one element of it that I find especially troubling is the degree to which minority borrowers, first time borrowers, first time homeowners, immigrants, the least sophisticated people in this country, the very people that the government said they wanted to help become homeowners, to get their piece of the American dream — those people were targeted by these banks because they knew they were unsophisticated.

They were targeted with the most expensive, the most punitive and the most toxic loans bar none. And to me that is such a failure of this country. If we are going to encourage home ownership, let’s not do it on the backs of the very people that we are supposedly trying to help, the most vulnerable people in this country have been hurt the worst by this crisis, families wrecked, homes lost. They were abused in this entire mania and people profited from that abuse and I think that’s wrong.”

BILL MOYERS: “Well, as you know the pushback is, well, they shouldn’t have been encouraged to buy a home, but they should have had the common sense not to buy a home without knowing more about what they were getting into.”

GRETCHEN MORGENSON: “That’s a good argument. But when you talk to people who English is their second language and when you talk to people who have never, you know, had an investment account, who really don’t even maybe have a bank account and you’ve got some slick mortgage broker saying, “Oh, just sign here on the dotted line, everything’s going to be fine,” you can see how that goes awry. I mean, I’m a sophisticated person and, you know, I have to ask multiple questions if I’m looking at one of these mortgage documents.”

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Former New York Governor Eliot Spitzer and Chris Hayes discuss the possibility of a reported agreement that may not hold U.S. banks liable for mishandling mortgage notes.

Is President Obama really going to use the State of the Union speech on Tuesday to announce a deal between big banks and all 50 state attorneys general? And if so, is it going to be a good deal for American homeowners? Or a good deal for the banks? Former NY Governor and Attorney General Eliot Spitzer shares with Chris what he has heard the White House has been pushing for. Click here to watch the full video.

When asked should the Attorneys General cave-in to the White House pressure to settle with the banks, former New York Governor and Attorney General Eliot Spitzer said:

“NO! NO! NO! NO!”

After you’d read and reviewed the facts – hopefully, before President Obama’s State of the Union Address – call and/or email the President and as Yves Smith suggests: “Please call your state attorney general (and your Congressional Legislators) and tell them you think taking from your pension to enrich banks for abusing homeowners is a lousy idea and they should therefore refuse to sign on to the settlement. You can find their phone numbers here. Please call today if you haven’t already. Thanks!”

President Obama has the ability to stop and change the direction of this sweetheart deal. He should reject any deal that benefits the one percent and lets the big banks get away with their crimes. Instead, the president should stand with the 99 percent and push for real accountability and a solution that will help millions of people in this country.

Federal prosecution of financial fraud has reached a 20-year low under the current administration¹. President Obama should reverse this trend and make sure the Wall Street executives responsible for this economic crisis are held responsible. No deal should be cut that lets them off the hook.

Call the White House today and tell the President to stand with the 99% by making sure banks pay their fair share in any settlement over mortgage fraud and illegal foreclosures. 

Call The White House at (202) 456-1111 Here’s what you can say when you call: “Hi, my name is [NAME], and I am calling from [STATE]. I’m calling to ask President Obama to stand up for homeowners and hold Wall Street accountable. We need a full-scale investigation into the big banks and Wall Street, and criminal prosecution for bank executives. Furthermore, any settlement with big banks must include at least $300 billion worth of principal reduction for underwater homeowners.” 1 http://thinkprogress.org/special/2011/11/16/369522/federal-prosecutions-financial-fraud/