Back in January, after Donald Trump had nominated Steven Mnuchin as treasury secretary, I uncovered a leaked document from the California attorney general’s office that showed OneWest Bank repeatedly broke foreclosure laws under Mnuchin’s six-year reign as CEO and then chairman. Prosecutors in the state’s Justice Department wanted to file a civil enforcement action against the company for “widespread misconduct,” but the attorney general at the time, Kamala Harris, overrode the recommendation and declined to prosecute. She never gave a reason.
Months later, this revelation has been granted new life, wielded as a political weapon by those who oppose Harris’s possible presidential run—most prominently in Ryan Cooper’s column in The Week about why “leftists don’t trust Kamala Harris.” My report either confirms impressions of Harris as an ambitious sellout, or is breezily dismissed by her defenders as “propaganda” or even subtle racism. Though my story was published before Harris was seated as a senator, and was mostly about how OneWest Bank skirted the law in a rush to kick people out of their homes, it has become a flashpoint in the civil war over the Democrats’ future.
Missing in all of this are the victims of OneWest’s policies. Politicians and partisans only manage to care about the millions of families who saw their lives ruined over the past decade when they can be used as props against political enemies. The lack of accountability for the criminal enterprise in our nation’s boardrooms goes well beyond Harris and continues to this very day. But when actual issues sit on the periphery of our political debates, these problems will never get fixed.
Let’s recognize that no public official in this country, from Barack Obama on down, covered themselves in glory during the foreclosure crisis; to say that Harris failed to prosecute bankers is simply to say that she was a public official with authority over financial services fraud in the Obama era.
From the late Bush years through most of Obama’s presidency, at least 9.3 million American families lost their properties, whether to foreclosure or forced sale. The original sin of faulty loan originations, inflated appraisals, doctored underwriting, and improper placement into subprime loans led to fraudulent misconduct in securitization, loan servicing, loan modifications, and foreclosures, with millions of faked and forged documents used as evidence for the final indignity of eviction. There’s not a single step of the mortgage process that wasn’t suffused with illegal fraud during the housing bubble and its collapse.
The crisis resulted in a punishing recession and countless destroyed lives, not to mention what has been credibly described as an “extinction event” for the black and Latino middle class. Yet from New York to California, Arizona to Florida, Washington state to Washington, D.C., the political class and law enforcement elite responded largely with indifference. Powerful bankers with armies of lawyers were allowed to get away with the crime of the century (thus far).
Just look at the actual charge the Consumer Law Section wanted Harris to file in the OneWest case: a civil enforcement action. Though he was OneWest’s chairman, Mnuchin was never at risk of indictment or conviction. At best, California would have extracted a decent-sized fine from the company—paid for by shareholders—and guarantees meant to deter further law-breaking; it’s possible that Mnuchin, his reputation sullied, would not have ended up in charge of federal banking policy. This watered-down version of public accountability was seen as the best possible outcome, and Harris didn’t even go for that.
This doesn’t make her particularly special. Eric Holder and Lanny Breuer took hiatuses from their careers as corporate lawyers to join Obama’s Justice Department and ensure light punishment for financial abuses. Tom Miller, the attorney general of Iowa, ran the 50-state investigation of foreclosure fraud, which investigated nothing and moved directly to a weak settlement that delivered 90 percent less relief for homeowners than promised. Eric Schneiderman, New York’s attorney general, sold out supporters by agreeing to that settlement, saving it from the brink of collapse. He co-chaired a so-called “task force” on bank crimes that did nothing but ink more toothless settlements and proudly proclaim fake headline numbers about fines from behind a podium.
In other words, if you were to rank the performance of law enforcement officials during this period, everyone would be tied for last. They all deserve criticism for their inability to hold the perpetrators of the biggest incidence of consumer fraud in American history to account. They all displayed shocking cowardice and let down millions of vulnerable people, when they had reams of documentary evidence revealing the crime, enough to extract much more justice and far better outcomes for the victimized. They all ushered in the two-tiered system of justice that sapped people’s faith in democracy and at least partially led to the rise of Donald Trump.
There are plenty of reasons why bank executives avoided the fate they suffered in the late 1980s, when in the wake of the savings and loan crisis over 1,000 executives were convicted. But if we want to indulge in a litmus test over corporate crime, we don’t have to wait for the next wave of abuse to occur.
Every day in America, somebody gets tossed out of a home based on false documents. Their elected officials surely know this; if I get a steady stream of letters from people with consistent stories about mortgage fraud, then senators and congressmen surely do as well. So instead of debating who was “tough” on corporate criminals and who wasn’t—since no one was—we should implore these would-be leaders to speak the hell up about the perversion of justice happening every day in courtrooms and foreclosure auctions across the country.
Senator Harris represents California, where the unconscionable treatment of foreclosure victims continues to terrorize families. Senator Cory Booker styles himself a leader in New Jersey, home to the highest foreclosure rate in the nation. The last time Senator Bernie Sanders said a word about foreclosures was when he was trying to win a primary election in hard-hit Nevada. There are activist groups all over Massachusetts fighting foreclosures that could use some high-profile support from Senator Elizabeth Warren.
Homeowner victims have spent the past decade largely invisible from public debate. The only time their plight gets highlighted is when somebody has an axe to grind against a particular public official. Only then do homeowners get trotted out for sympathy, as if the country didn’t ignore them for years. This is the problem with a politics of personality, which is consumed more with doling out praise and blame for high-profile politicians than demanding justice for broad social problems. It’s time the left put the issues back at the center of public debate.