Congressmen Attack LPS, Servicer Misconduct; PR Counteroffensive Starting

From Naked Capitalism by Yves Smith.

Only been a few Congressmen have weighed in on the mortgage documentation mess so far, since wrapping up the current Congressional session and campaigning consumes a lot of bandwidth. Nevertheless, I am getting reports from DC that people on the Hill are starting to take the issue of foreclosure document fabrication, errors, and improprieties seriously.

Some signs of motion today: Al Franken of Minnesota (ironically, the state that has implemented the most bank friendly foreclosure regime in the US) sent a letter to the supposed adults in the room (Geithner, Bernanke, Bair, US attorney general Eric Holder, HUD Secretary Shaun Donovan, and Acting Comptroller of the Currency John Walsh). He asked them to investigate servicers, identify individuals who have been harmed by illegal foreclosures, and in particular, hold GMAC and its employees accountable for any criminal misconduct. He also calls for more oversight of servicers. …

But cleaning up the mortgage mess would fix the economy. The uncertainty over when the housing market will clear and how much of bank earnings and reported equity are a function of extend and pretend is impairing credit market activity. Why do you think new mortgage lending is now a subsidiary of the US government? This unhealthy state of affairs is a direct result to the failure to clean out the rot in the mortgage market.

So we have a simple choice, having the rule of law in this country or capitulating to the banks’ false claims that exposing their malfeasance will cause widespread economic harm. In reality, the biggest potential casualty is the financiers’ unwarranted privileged status. That is why they are so quick to resort to fearmongering, to obscure what is really at stake. But the odds are high that we will again accede to overhyped threats to security and sacrifice what should be bedrock principles of a democratic society.