Wednesday, February 20, 2013

Detroit Foreclosures, Fraud & the Big Fight

Foreclosures, fraud & the big fight

Rallied neighborhoods, picketed banks, blocked Dumpsters, packed courtrooms

By Curt Guyette

Evidence of that was also on display, as people such as Jennifer Britt of Detroit talked about how having activists and their community rally around them was the thing that eventually forced a lender to concede and work out an agreement that allowed her to remain in her home.

“People get afraid and they pack up and walk away,” said Jerry Cullors, another homeowner facing eviction. “But they need to stand up and stop walking away.”

What’s interesting about this movement is the way its ranks keep growing. It began with a few people helping others to fight back. And then those who were helped joined in the fight, and began helping others. Now, organized labor has entered the fray, with union members turning out to do things like block Dumpsters from being placed in front of homes, and picketing banks.

Faith-based groups are also engaged. And it works, to an extent, with banks making concessions in an attempt to avoid negative publicity.

“We’ve been winning lots of skirmishes,” said Steve Babson, who has been with Moratorium Now! since its earliest days. “But we’re still losing the war.”

There need to be broader protections, say activists. Gaining them, however, is an immense struggle.

As attorney Bob Day pointed out at the rally, “The banks control the government, and the government serves the banks.”

Which brings us to the connection between Wednesday’s rally and the press conference held the following day at City Hall.

The reason activists such as Sole, who is represented by Goldberg in the FOIA action, want the city to turn over all its records regarding the city’s bond agreements is their belief that, just as homeowners were conned into taking on subprime mortgages that eventually led to default, the city of Detroit has been caught up in a downward spiral of loans designed to benefit the big banks and Wall Street, to the great detriment of the city’s residents and municipal employees.

As it is now, the machinery of government is geared toward protecting the bondholders. That’s not just a matter of opinion. It is part of the explicit purpose of the state’s emergency financial manager law, and the consent degree the city was forced to sign last year.

Above all else, bond debt must be paid, even if it means going deeper into debt by issuing yet more bonds in order to do that.

Here’s just one example of that Goldberg points to: Last March, when the city borrowed $80 million with the assistance of the Michigan Finance Authority, $39.6 million of that loan went toward existing debt service.

What he describes is a sort of financial death spiral: As the city’s debt load grows larger, and its credit ratings sink lower, this cost of borrowing that money increases.

The purpose of the FOIA Goldberg filed on behalf of Sole is to learn exactly how much the deals have cost the city, and what, exactly, the officials who were entering into them knew.

The hope of the activists is that the city of Detroit, instead of working to protect the banks and bondholders, will begin to go after them in an attempt to make them pay for the damage they have done, just as individual homeowners have had success rallying together in an attempt to help each other stave off eviction.

Looked at that way, it is all of one piece. A giant scam, with the banks always winning, until people — or the governments that are supposed to be looking out for their interests — begin to fight back.

The thing is, the cries of foul can’t be written off as merely the claims of wild-eyed radicals. We have the results of a massive report produced by a Senate subcommittee chaired by Michigan’s Carl Levin. That report, released in April 2011, reveals the extent to which the financial crisis that began to unfold in 2007 was the result of widespread fraud.

Two weeks ago, the U.S. Justice Department launched a lawsuit seeking $5 billion in penalties from the bond-rating agency Standard & Poor’s, and its parent company, McGraw-Hill. The suit alleges that, as Bloomberg reported, S&P “made false representations, concealed facts and manipulated ratings criteria and credit models for profit.”

The companies, not surprisingly, say the allegations aren’t true.

That’s part of the big picture.

What we saw in Detroit last week is how activists are continuing not only the fight to help keep people from losing their homes, but also attempting to bring into better focus how the city itself has been a victim in all this.

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