Two events held last week appeared only tangentially connected — at first glance, anyway.
The first was a rally held by a coalition focused on helping homeowners fend off foreclosure and eviction. The other was a press conference on the fifth floor of the Coleman A. Young Municipal Center, outside the offices of the city of Detroit’s Law Department.
In regard to the latter, a Freedom of Information Act request has been filed seeking to have the city turn over 10 years’ worth of records related to all contracts and agreements between the city and “banks or brokerage houses relating to the purchase of bonds, interest rate swaps, pension obligation certificates, hedge fund derivatives, termination or default agreements, or other forms of debt…”
The request was initially filed in early January by David Sole, a retired city of Detroit employee, but it is really part of a larger group effort aimed at finding out exactly how banks and bonding agencies have been putting the screws to Detroit through a series of complicated and convoluted financial machinations.
Although the city was supposed to have provided the requested material within no more than 15 working days, it has yet to be turned over. As a result, a lawsuit was launched last week in an attempt to force the city to provide the requested documents.
What connects the rally and the FOIA lawsuit is the claim that the big banks and Wall Street have wreaked havoc in Detroit, both in terms of forcing individuals from their homes — helping to devastate the city’s tax base — and by engineering complicated financial maneuvers that have helped saddle the city with a crippling debt burden.
Trying to draw attention to both issues is attorney Jerome “Jerry” Goldberg, a self-described radical who has been in the trenches of the home foreclosure battle since at least 2007.
He’s not alone, of course. A small group of activists and attorneys have been working to protect homeowners from foreclosure and eviction since forming the Moratorium Now! Coalition nearly six years ago.
From the outset, the coalition has been urging officials, ranging from the mayor of Detroit to the governor of Michigan to the president of the United States, to utilize a Depression-era law that authorizes them to declare a state of emergency and order a halt to home foreclosures.
At the rally, held Wednesday evening at metro Detroit’s AFL-CIO union headquarters, activists were still at it, passing out petitions calling upon President Barack Obama to “protect our neighbors from foreclosure and our communities from blight by requiring Fannie Mae and Freddie Mac, mortgage investors operated by the federal government, to reduce principal on overvalued mortgages and halt the foreclosure of hard-pressed homeowners.”
As numerous victims of foreclosure pointed out at the rally, current federal policies are actually encouraging banks to foreclose. That’s because, instead of taking a loss, lenders are often recouping 100 percent of a mortgage’s value. Those who are taking the hits are the people losing their homes, and U.S. taxpayers, who, while making sure that the banks don’t suffer the consequences of bad loans, are being left holding homes worth only a faction of what they were once valued.
Among those speaking at the event held by the Detroit Eviction Defense coalition — which is made up of homeowners, neighborhood groups, community activists, local unions and faith-based organizations — was Bob Goss of Troy. After losing his auto company job in 2008, Goss thought he would be able to keep his home when he discovered the federal Home Affordable Modification Program, or HAMP.
Instead, what he got was a runaround from the bank he was dealing with. After submitting the required paperwork via certified mail, he was repeatedly told that first one piece of information and then another was missing, Goss said.
“They said they lost page four, then they lost page six, then they lost part of my tax information,” he told the gathering of about 120 people. “They lost this, and then they lost that.”
Finally, he came to realize that it was “really a game being played here.”
He didn’t realize just how sinister the game was until, thinking that he had successfully modified his mortgage agreement, and making 22 monthly payments, his home was still foreclosed on and sold at a sheriff’s sale last year.
He has remained in his home while fighting the foreclosure in court.
“The system,” he said, “bulldozes over everybody.”
He’s right in that the devastation has been widespread. Organizers billed last week’s rally as an attempt to help homeowners battered by “Hurricane Fannie,” and described what’s happened in southeast Michigan as a “hurricane without water,” leaving people homeless and local governments devastated by the blight and decimated property tax revenues foreclosures have caused.
There was, however, another aspect of this story that the members of Detroit Eviction Defense wanted to spread.
It is this: Applying public pressure works.
As noted in the flier promoting Wednesday’s event: “We support alternative legal strategies and nonprofit finance to keep people in their homes. We have rallied neighborhoods, picketed banks, blocked Dumpsters, packed courtrooms, and marched on government offices to stop foreclosures and evictions.”
In the years that the folks from Moratorium Now! and others have been fighting to keep people in their homes, what they’ve learned is that the courts cannot be depended on to protect the rights of homeowners. Lenders have teams of well-paid attorneys skilled at convincing courts to move people out of their homes.
Attorney Joe McGuire — who first became involved in this issue as part of the Occupy movement — pointed out that what works is taking this fight to the streets.
Evidence of that was also on display, as people such as Jennifer Britt of Detroit talked about how having activists and their community rally around them was the thing that eventually forced a lender to concede and work out an agreement that allowed her to remain in her home.
“People get afraid and they pack up and walk away,” said Jerry Cullors, another homeowner facing eviction. “But they need to stand up and stop walking away.”
What’s interesting about this movement is the way its ranks keep growing. It began with a few people helping others to fight back. And then those who were helped joined in the fight, and began helping others. Now, organized labor has entered the fray, with union members turning out to do things like block Dumpsters from being placed in front of homes, and picketing banks.
Faith-based groups are also engaged. And it works, to an extent, with banks making concessions in an attempt to avoid negative publicity.
“We’ve been winning lots of skirmishes,” said Steve Babson, who has been with Moratorium Now! since its earliest days. “But we’re still losing the war.”
There need to be broader protections, say activists. Gaining them, however, is an immense struggle.
As attorney Bob Day pointed out at the rally, “The banks control the government, and the government serves the banks.”
Which brings us to the connection between Wednesday’s rally and the press conference held the following day at City Hall.
The reason activists such as Sole, who is represented by Goldberg in the FOIA action, want the city to turn over all its records regarding the city’s bond agreements is their belief that, just as homeowners were conned into taking on subprime mortgages that eventually led to default, the city of Detroit has been caught up in a downward spiral of loans designed to benefit the big banks and Wall Street, to the great detriment of the city’s residents and municipal employees.
As it is now, the machinery of government is geared toward protecting the bondholders. That’s not just a matter of opinion. It is part of the explicit purpose of the state’s emergency financial manager law, and the consent degree the city was forced to sign last year.
Above all else, bond debt must be paid, even if it means going deeper into debt by issuing yet more bonds in order to do that.
Here’s just one example of that Goldberg points to: Last March, when the city borrowed $80 million with the assistance of the Michigan Finance Authority, $39.6 million of that loan went toward existing debt service.
What he describes is a sort of financial death spiral: As the city’s debt load grows larger, and its credit ratings sink lower, this cost of borrowing that money increases.
The purpose of the FOIA Goldberg filed on behalf of Sole is to learn exactly how much the deals have cost the city, and what, exactly, the officials who were entering into them knew.
The hope of the activists is that the city of Detroit, instead of working to protect the banks and bondholders, will begin to go after them in an attempt to make them pay for the damage they have done, just as individual homeowners have had success rallying together in an attempt to help each other stave off eviction.
Looked at that way, it is all of one piece. A giant scam, with the banks always winning, until people — or the governments that are supposed to be looking out for their interests — begin to fight back.
The thing is, the cries of foul can’t be written off as merely the claims of wild-eyed radicals. We have the results of a massive report produced by a Senate subcommittee chaired by Michigan’s Carl Levin. That report, released in April 2011, reveals the extent to which the financial crisis that began to unfold in 2007 was the result of widespread fraud.
Two weeks ago, the U.S. Justice Department launched a lawsuit seeking $5 billion in penalties from the bond-rating agency Standard & Poor’s, and its parent company, McGraw-Hill. The suit alleges that, as Bloomberg reported, S&P “made false representations, concealed facts and manipulated ratings criteria and credit models for profit.”
The companies, not surprisingly, say the allegations aren’t true.
That’s part of the big picture.
What we saw in Detroit last week is how activists are continuing not only the fight to help keep people from losing their homes, but also attempting to bring into better focus how the city itself has been a victim in all this.
News Hits is written by Curt Guyette. Contact the column at 313-202-8004 or [email protected]