Part of the problem with big financial

scandals like the whole real estate/subprime mortgage explosion is that it’s like a slow-motion collapse of a house of cards. We don’t know exactly where the tipping point was, and it’s incredibly difficult to sort out the blame afterward. Which is why there shouldn’t be any rush to sweep away the mess even now, four years later.


Right now the Obama administration is in negotiations with a number of state attorneys general and the mortgage industry for a joint settlement that would grant the mortgage services immunity from further prosecution in exchange for a financial settlement, reportedly as little as $20 billion to $25 billion.

To put this in context: Countrywide Financial, considered to be near the center of the giant money-sucking vortex that was the subprime fiasco, issued $424 billion in loans before it went belly up and was absorbed by Bank of America. And according to a House of Representatives resolution against immunity, the $8.5 billion settlement agreed to with BoA would cover only 2 percent of that sum—talk about your pennies on the dollar.

Meanwhile, here in Baltimore, the city and the NAACP are still waging legal war against Wells Fargo, another of the mortgage servicers at the heart of the collapse. Black Baltimoreans won’t quickly forget the affidavits filed by former Wells Fargo employees that told stories of African-American applicants who qualified for prime loans being steered into subprime ones, and loan officers referring to blacks as “mud people” and subprime loans as “ghetto loans.”

In a June 2009 story on the subprime collapse,

The New York Times

quoted an affidavit from Tony Paschal, a loan officer who worked for Wells Fargo in Northern Virginia, which said the company put “bounties” on minority borrowers, aggressively targeting them for loans and providing bonuses and vacation trips for those who brought in the most clients, mostly in Baltimore, Prince George’s County, and Southeast Washington, D.C. In an analysis of subprime lending in New York City, in comparison, the


found that black households with an income of more than $68,000 a year were five times more likely to have a subprime loan than whites making the same amount—with an even larger disparity among Wells Fargo borrowers.

States investigating the collapse have found shocking instances of alleged mortgage fraud, many centering around a practice called “robo-signing,” where banks were found to have filed false papers in state courts, signing off on mortgages without verifying the content or veracity of the documents.

So why would there be such a rush to dispose of the whole mess so quickly, when there are still thousands of homeowners “underwater,” owing more on their homes than they’re worth? And what’s with the glaring silence from Maryland Attorney General Doug Gansler regarding the federal settlement offer?

A number of state attorneys general have backed out of the federal government’s settlement: California’s Kamala Harris, Kentucky’s Jack Conway, New York’s Howard Schneiderman, Delaware’s Beau Biden, and Nevada’s Catherine Cortez Masto have all balked at signing off on the deal, Schneiderman even getting kicked off the committee working on the 50-state settlement by lead AG Tom Miller of Iowa in August.

Two weeks ago Gansler announced a settlement with Wells Fargo, Golden West, and Wachovia over alleged deceptive marketing of mortgage products, but the sum was relatively small—Wells Fargo will pay only about $940,000 as restitution to customers in its “Pick-A-Payment” program who lost their homes to foreclosure. But other than that, Gansler has taken no public stand regarding the 50-state settlement.

Why the tight-lipped posture?

Well, pardon our cynicism, but we live in a political world, and Gansler is a political kind of guy, so we can make a few assumptions.


Gov. Martin O’Malley has only two years left in office. There aren’t a whole lot of high-profile offices in Maryland with the kind of statewide visibility for running for the job once O’Malley’s gone, but attorney general is one of them. Gansler, who turns 50 this year, doesn’t seem to be the type of guy to sit in the AG’s office for the rest of his career like his predecessor Joe Curran. Gansler’s the kind of pol who likes to talk to the media (something that got him in some trouble when he was the state’s attorney from Montgomery County prosecuting the beltway sniper case), and those are the guys who politically don’t stop until they have the brass ring.

In 2014, there’ll be another wide-open gubernatorial election, the kind where you’re going to need a whole lot of money for the primary, and, depending on whether the GOP can salvage a candidate from the remains of what Smooth Bobby Ehrlich has left of their party, possibly the general election as well. And pissing off the financial community with a long, protracted fight over immunity for Wall Street mortgage lenders is one way to shoot yourself in the foot when it comes to big-dollar fundraising.

Of course, we could be wrong. That’s our cynicism talking. But it would be nice for Gansler to step up and tell us all, one way or another.