Obama Is Pushing For A Cheap Deal To Protect The Banks Against Fraud Investigation and Prosecution

AFL-CIO's Trumka Joins Chorus Calling for Investigation of Banks

The buzz is that President Barack Obama is pushing hard for a deal with the big banks over the foreclosure crisis in advance of the State of the Union address on Tuesday. Most observers are afraid that the deal will be too small and that the banks will get a slap on the wrist despite playing a major role in creating the financial crisis that led to a recession.

AFL-CIO President Richard Trumka joined a growing chorus calling for a rejection of such a small deal and calling for an investigation of the banks over potential fraud and illegal activity:

We need to hold banks accountable for the fraudulent practices that brought about the worst economic crisis since the Depression. State Attorneys General have been investigating bank fraud, and these critical investigations must not be undermined by a premature and inadequate settlement. We call on the administration to reject any deal that insulates banks from full responsibility.

We commend state Attorneys Generals like New York’s Eric Schneiderman and Delaware’s Beau Biden for their leadership and courage in calling for a real investigation and relief on a scale that helps the millions of homeowners who face a new wave of foreclosures.

The economy is currently weighed down by $750 billion in negative home equity, so relief on a massive scale is needed to lift home values and stimulate the economy by increasing consumer demand. A comprehensive settlement must force banks to write down underwater mortgages. A sum significantly larger than the rumored $25 billion is needed for the economy to grow and create jobs.

Specifically, the administration must stand strong against the Big Banks and insist on:

1. A full and thorough investigation into problems tied to the residential mortgage-backed securities (RMBS) market, and

2. A guaranteed minimum amount of money set aside for reducing the mortgage principal of “underwater” homeowners in key states impacted by the foreclosure crisis.
This is an opportunity for the administration to demonstrate leadership and show that it has the political will to do what’s right for homeowners and right for our economy.

Robert Borosage, of the Campaign for America's Future, hits on one of the key problems with such a settlement, immunity from prosecution for banks who broke the law:

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