The Massachusetts Supreme Court issued a major decision against the banks on the issue of foreclosure fraud earlier today. In US Trust vs. Ibanez, the court ruled that the banks in the case did not have standing to foreclose when they failed to assign the mortgage prior to foreclosure. The case carries significant implications, as many foreclosures may be declared invalid in Massachusetts, and the ruling could influence other state courts. The decision has already sent bank stocks down.
Now that the Massachusetts Supreme Court has identified a fundamental problem with the mortgage securitization and foreclosure process, Wall Street bankers and their friends in Washington may also have a harder time working hand in glove to stamp out the foreclosure fraud firestorm.
Last October, when foreclosure fraud started capturing national headlines, the Obama administration joined the banks' PR offensive and helped spin illegal foreclosure as a minor clerical issue. At a critical point in the process, White House adviser David Axelrod appeared on Face the Nation to say that he regretted that there was "uncertainty" in the housing market, that the administration was working closely with financial institutions, and that they hoped the issue would be resolved quickly. He also said that the administration opposed a nationwide moratorium due to the fact that some foreclosures were valid.
At the time, Yves Smith said that the comments revealed "astonishing" priorities on the part of the Obama administration.
We do not know whether Bank of America wrote Axelrod's talking points, but we do know that he was partying with the bank's top public relations strategist a few days later. Axelrod attended an epilepsy research fundraiser in Boston later that week that was co-chaired by Bank of America executive Anne Finucane. The other co-chair, along with Finucane's husband? Axelrod's wife, Susan, a co-founder of Citizens United for Research in Epilepsy. Other prominent attendees are listed here.
In one picture from the event, David is standing next to an amused Finucane, a huge, clownish smile on his face, trademark mustache and brow in full effect, with one arm extended as if he is about to shake the hand of the photographer.
Obama's point man on foreclosure fraud could not possibly look like a bigger corporate tool, arm in arm with Bank of America's top public relations strategist at the height of the foreclosure fraud mess.
The "foreclosure fraud as inconsequential clerical error" argument has always been spin meant to mislead the public, put forward by Wall Street with help from government cronies like David Axelrod. Zero Hedge calls these folks the "kleptocratic banker mafia syndicate," and they come together at events like the Axelrod-Finucane fundraiser to further strengthen their social ties. But did they forget to invite the judge?
When the foreclosure fraud scandal hits the front pages again, and threatens to hurt powerful financial institutions -- rather than just the foreclosed, unemployed, and powerless -- will the syndicate keep pushing the paperwork canard? Will Obama dispatch another Wall Street flack to the Sunday circuit, to say that the issue needs to be resolved quickly? And will talking points matter when court cases keep piling up?
It will be interesting to see how this plays out.