As the 99 Percent Movement takes shape across the country, citizens are demanding that Congress represent the public interest instead of the whims of bankers and big corporations. For instance, after demanding and receiving massive bailouts, Wall Street banks successfully lobbied Congress to crush any serious effort to mitigate the foreclosure crisis. The spectacular bank lobbying coup in Washington prompted Sen. Dick Durbin (D-IL) to remark that the banks “frankly, own the place.”
And this dynamic is not only at play in Washington: Banks have a disproportionate amount of power in California as well.
As one of the epicenters of the foreclosure crisis, Californians by the tens of thousands have lost their homes. In most cases, banks have repossessed houses without bothering to re-negotiate interest payments to find foreclosure alternatives. And in a growing number of cases, “robo-signers” have allegedly forged documents and illegally foreclosed on borrowers. Since the foreclosure crisis is leading towards a spiraling decrease in home property values across the state, nearly everyone is affected.
A common sense idea to add transparency and accountability to the mortgage market died a quick death earlier this year. State Sen. Mark Leno (D-San Francisco) and State Sen. Darrell Steinberg (D-Sacramento) proposed SB729, a measure “to require banks to give people a definitive answer on loan modification, identify who owns the loan, and give borrowers legal recourse if banks don’t take these steps.”
The idea, embraced by consumer advocates and many foreclosure experts, did not even make it out of committee. State Sen. Juan Vargas (D-San Diego), the chairman of the banking committee, joined two Republican state senators in snuffing the bill. State Sen. Alex Padilla (D-Los Angeles) abstained from the vote, ensuring a 3-3 split (a tied vote does not allow the bill to proceed). Despite moving testimony from victims of foreclosure fraud and persuasive academic opinion, the bill died. To understand why, simply follow the money:
– Bank of America, a leading mortgage-lender in California, spent $173,703 lobbying this year in Sacramento. Disclosure reports show Bank of America hired lobbying firms like Nielsen Merksamer and Government Relations Counsel to kill SB729. Reports also show that Bank of America treated Vargas to dinner at the Ella Dining Room and Bar about a month after he voted to kill the foreclosure mitigation bill. Bank of America has contributed $5,500 in campaign contributions to Vargas and nearly $2,000 to Padilla.
– The California Mortgage Bankers Association, a lobbying group representing a number of mortgage lenders in the state, spent $55,711 lobbying in Sacramento this year. The bankers hired KP Public Affairs, a firm that doubles as the general counsel for the association, to help kill SB729. The group donated $4,000 to Vargas and $1,000 to Padilla recently.
– Wells Fargo spent $84,027 lobbying in Sacramento, and hired a firmed called Knudsen & Associates to help kill SB729. Wells Fargo has contributed $2,800 to Padilla and $2,000 to Vargas. Disclosure reports show agents for Wells Fargo took a state senator out to lunch shortly after the SB729 vote, but the disclosure forms appear to be incomplete because the name of the senator is not filled in.
JP Morgan Chase, the California Chamber of Commerce, Fidelity National Financial, the Securities Industry And Financial Markets Association (a trade association representing investment banks like Goldman Sachs and Barclays Capital), and other bank-related organizations spent tens of thousands to lobby against SB729.
In an article last month in the San Diego Union Tribune, Vargas pled ignorance while explaining his role in killing the mitigation and transparency measure:
“If a homeowner is doing everything the bank asked him or her to do and the bank forecloses, I think that’s very inappropriate and should be a violation of the law. But I don’t remember hearing any testimony about that kind of thing while we were discussing this bill.”
According to sources contacted by ThinkProgress, Vargas was in the hearing room with witnesses who testified about a host of unfair and rushed bank foreclosures. Perhaps the dinner Bank of America bought Vargas after the vote had some memory-wiping ingredients.