Banks (and their stocks) are reeling, and this news isn’t going to help: On Friday, California, the nation’s number-one state for foreclosures, has pulled out of 50-state negotiations to reach a settlement over robosigning and other foreclosure related issues.From WSJ:
In a letter sent Friday to Associate U.S. Attorney General Thomas Perrelli and Iowa Attorney General Tom Miller, who have been leading the negotiations, [California AG Kamala D] Harris said her decision to break off from the group was driven in part by those two key concerns. “It became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated,” she said.
She added that “the relief contemplated would allow too few California homeowners to stay in their homes.” Ms. Harris also cited a recent “troubling surge in foreclosures,” which had plummeted in the wake of the robo-signing scandal.
Progressive political groups are thrilled at the development, which probably is a good sign that the banks are going to be furious.
If you’re disgusted with the big banks, this is the best email you will read in a long time.
Breaking news! Kamala Harris, California’s Attorney General, has rejected the bogus 50 state settlement pushed by the big banks. Without California, the entire effort to lure the 50 Attorneys General into signing a “get out of jail FREE” card is crumbling.
For the first time, we’ve got the banks on the run. They’re terrified. We can finally extract justice on them for bankrupting our country!
How did this happen? We showed Kamala Harris that we would support her if she did the right thing. Nearly 10,000 Courage Campaign members signed our petition, and the momentum is on our side.
California has 10% of the nation’s population and was devastated by the foreclosure crisis. These fat cat bankers are not going to get off scot-free if we don’t let them…
1. A reduction on principal balances on all underwater mortgages to help stabilise our state economy and create more than 300,000 jobs in California
2. Limited immunity so banks are not off the hook from wrongdoing or future investigations
3. A monetary penalty that is commensurate with the harm caused by the banks: far past the bank-proposed $20 billion to be shared nationwide.
This won’t be good for bank stocks on Monday, though at this point there are so many legal problems (this, various private lawsuits, the FHFA lawsuit etc.) you almost don’t know where to start. What does seem clear is that without California, there’s almost no point in the banks agreeing to a settlement with the other states, since the whole idea was to put this issue behind them, and get immunity from further action.
And we can only imagine that AGs in other foreclosure hot spots (Nevada, Arizona, etc.) are reconsidering their participation in light of the rebel stance taken by their neighbour.
UPDATE: Here’s the full letter: