Op-Ed: Deal Puts Principle Over Profit
Op-Ed published in the Albany Times Union
By Eric T. Schneiderman
It is a fundamental principle of our democracy that everyone must play by the same rules.
Whether it's a large financial institution, a small investor or an average homeowner, the same set of rules must apply.
That's why, two years ago, I put a halt to a deal that would have let major banks get away with fraudulent practices that nearly blew up the U.S. economy.
And it's why, last week, JPMorgan Chase entered into the largest settlement ever levied against a financial institution.
JPMorgan executives saw the value in what I've been calling a peace agreement — making restitution, admitting wrongdoing and putting this disastrous episode behind them.
In the short term, the $9 billion in cash and $4 billion in relief for consumers, including mortgage modifications for homeowners at risk of foreclosure, that JPMorgan will provide will give real relief and a measure of justice to victims.
For New York, it's a tremendous win — $613 million in cash and what we expect will be nearly $400 million for consumers who for far too long have been at the mercy of unscrupulous lenders.
When I took office in 2011, 345,000 New York homeowners were at risk of foreclosure. Half of them had never consulted with an attorney while struggling to deal with banks intent on throwing them out on the street.
Incredibly, some of those same banks were about to sign a deal with federal and state officials that would have barred any investigations or lawsuits stemming from malfeasance in the pooling, marketing and selling of residential mortgage-backed securities before the 2008 crash.
I refused to go along unless there was a full investigation of the reckless behavior that led to the crash. And in January 2012, President Barack Obama responded by creating the Residential Mortgage-Backed Securities Working Group — a first-of-its-kind state-federal task force — to get to the bottom of exactly what happened in the mortgage-backed securities market that caused the collapse of our housing market and our economy.
The president made me co-chair, and we entered into a $25 billion settlement with five major banks covering abuses in mortgage servicing and foreclosures that took place after the financial crisis occurred.
My office dedicated $60 million from that settlement to a Homeowner Protection Program that provided legal and housing counseling services to at-risk mortgage holders. HOPP grantees have helped tens of thousands of New Yorkers keep their homes.
New York also got more relief for its citizens than any other state — about $2 billion with the help of HOPP.
The national mortgage settlement, however, did nothing to address the far more egregious misconduct in the mortgage-backed securities market that created the financial crisis in the first place.
So my office — empowered by the Martin Act, which gives the New York attorney general broad investigative authority over the financial industry — filed the working group's first case, a lawsuit against JPMorgan Chase, in October 2012.
The settlement with JPMorgan will now provide even more funds to help average New Yorkers stay in their homes.
But the deal does more than provide relief and restitution. It is an important step in restoring confidence that in our financial system, there is one set of rules for everyone, and that those who defy those rules will be held accountable.
We will continue to pursue financial institutions that put profit over principle at the expense of average Americans, and we will do everything in our power to make sure that malfeasance in financial sector can never again bring the economy to its knees.