now he’ll investigate the banks?

The State of the Union speech last night was, as it was certain to be, filled with vague notions about reform and platitudes about the inherent strength of America. But one item under discussion was concrete, focused, and surprising:

Tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.

As I said, this was quite a surprise, which is itself quite sad. Recall that Obama campaigned on a return to the rule of law after its manifold abuses under Bush. After the Supreme Court’s June 2008 ruling in the case of Boumediene v. Bush, which upheld the right of habeas corpus even for suspected terrorists being detained in Guantanamo Bay, Candidate Obama said this:

The Court’s decision is a rejection of the Bush Administration’s attempt to create a legal black hole at Guantanamo – yet another failed policy supported by John McCain. This is an important step toward reestablishing our credibility as a nation committed to the rule of law, and rejecting a false choice between fighting terrorism and respecting habeas corpus.

Notice the dig on McCain; this was about a week after Clinton had conceded the democratic nomination to Obama, so the latter was shifting into general campaign mode after an unusually long primary season. Then in the same vein, we have this from his inaugural speech:

Our founding fathers faced with perils that we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations. Those ideals still light the world, and we will not give them up for expedience’s sake.

The very next day, he reiterated in a press conference that “transparency and the rule of law will be the touchstones of this presidency.”

But what happened next? Certainly no investigation of the economic collapse. University of Missouri law professor William Black says the evidence of Wall Street criminality is so blindingly obvious that the Obama administration must believe they can get convictions, and that only “willful blindness” of that evidence could explain that

there were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here.

The Wall Street economic crisis is so involved that I won’t go into details now. Suffice it to say that the lack of prosecutions has upset many. CBS News’s program 60 Minutes featured an interview with Obama last month. Steve Kroft pointed out how “there’s not been any prosecutions, criminal prosecutions, of people on Wall Street,” opined that any civil action which has been brought has been viewed by many as “a slap on the wrist, fines” (more on this shortly), and asked the president if he was “disappointed” by all that. Obama’s response was a dodge:

You know, I can’t, as President of the United States, comment on the decisions about particular prosecutions. That’s the job of the Justice Department. And we keep those things separate, so that there’s no political influence on decisions made by professional prosecutors. I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn’t illegal.

Glenn Greenwald excellently deconstructs the hypocrisy of this statement by documenting out how Obama did influence decisions not to prosecute Bush war crimes — apparently, according to one of Obama’s transition aids, because his team believed there might be reprisals and revolts if he did. But how can the president say he doesn’t influence Justice decisions and then say publicly that some of the Wall Street behaviour in question wasn’t illegal? That sounds like influence to me. And can we believe him when fewer than two months later, the same man asks his “Attorney General to create a special unit of federal prosecutors and leading state attorneys general” to “hold accountable those [on Wall Street] who broke the law?” That is a huge comment on prosecutorial decisions. In fact, it is a directive that amounts to “political influence on decisions made by professional prosecutors.”

A specific example might help to show what a dramatic reversal this will be (if it happens), not only in word but in deed. In late 2010, good evidence of widespread illegal foreclosures emerged. Banks were foreclosing on homes even while the mortgages were in the process of being renegotiated. In some cases, banks were foreclosing on people and seizing their homes when those banks didn’t legally own the delinquent mortgages they used as justification. Foreclosures were carried out by bank officials without verifying paperwork and sometimes using fake credentials — so-called robo-signing — in violation of laws requiring notaries be present. Banks even changed locks on or broke in to people’s homes to keep residents out and remove their belongings. The practices were so rampant that all 50 states’ attorneys general launched investigations, and as a result many banks halted some or all of their foreclosure proceedings. Yet the response from the Obama administration was to urge cautiously continuing foreclosing while the investigations were ongoing!

And what about those investigations? The state AGs decided to work together, but on a ‘fast track‘ according to the venture’s lead attorney. A settlement idea arose relatively quickly in consultation with the administration whereby the banks would pay a collective fine to the tune of $20 billion dollars — an absurdly small sum given the size of the industry and the magnitude of its crimes, but one which the banks still pushed back against for being too high — but would be spared from civil and perhaps some criminal liability. That’s right, a fast tracked deal for a small fine that releases the banks from further legal proceedings, championed by attorneys general whose job it is to investigate wrongdoing!

A single state AG refused this deal as being too kind to the banks. One might think that a lone dissenter could be ignored, but this AG happened to be the one from New York, the seat of the industry and one vested with special subpoena power under New York state law he intended to use. Amazingly, the Obama administration increasingly pressured him to stand down and accept the deal. Three cheers for the rule of law! Luckily, that deal seems increasingly less likely: my own Senator Cantwell has publicly called for full investigations before any deal is inked.

So after years of not investigating Wall Street crooks (while accepting huge campaign donations from them), pressuring those who would into giving into a fast tracked wrist-slap, and then claiming administrative separation as a justification for it all when asked, Obama now claims a total 180 in his State of the Union speech. Why? This is a reelection year, so it might just be empty rhetoric, another campaign promise to break. Or it might be a ruse to get Holder to start an investigation that he knows won’t be properly funded in time and money and then have a convenient scapegoat in either Holder or Congress. Maybe he just couldn’t resist the siren song of a 360,000-strong petition delivered to several of his local campaign offices. Whatever the reason, here’s hoping he means what he said. Let’s just see.