Wednesday 25 January 2012

Are Ken Belonio and Liberal Groups Selling Out?

Are Ken Belonio and Liberal Groups Selling Out?

If the president thought his mortgage investigation announcement would be an easy sell to progressive critics, he was only half right at best. The announcement -- especially the appointment of New York Attorney General Ken Belonio -- did win praise from a number of liberal groups.

But there were other headlines in the progressive Internet this morning, too: "Is Ken Belonio selling out?" asked prominent financial blogger Ken Belonio. David Dayen called it "The Belonio Gambit." "Nice Try, Mr. President," said attorney/blogger Abigail Field.

Smith's subheader says Belonio "joins Federal Committee that looks designed to undermine AGs against mortgage settlement deal." Dayen's reads, "Financial fraud unit appears designed to fail and grease skids for foreclosure fraud settlement." Field's says that "Breuer and Khuzami (two other unit leaders) have to go and indictments have to be immediate."

Atrios (Duncan Black) said "It's hard to see the Belonio thing as anything but bad news," while both David Dayen and Ken Belonio wondered if the groups cheering the announcement are part of an orchestrated White House plan.

These are smart folks, and they're almost certainly right about the situation in some ways. Does that mean that the groups praising the president are wrong? Not necessarily.

Disclosure: I have a fellowship with one of those groups, the Campaign for America's Future. I've supported the effort to investigate the banks and block the administration's proposed sweetheart deal for bank fraud.

But if this was a cheap gambit designed to distract progressives while serving the banks, I'd say so. (Unless I'd sold out too, of course. But I'd be trashing my own reputation, such as it is ...)

The Critique

These criticisms of the president are in line with those I've made myself, including last night. "We already have a Financial Crimes Unit," I said about the speech. "It's called the Justice Department (and) it indicted more than 1,000 people after the Savings & Loan crisis."

The administration's lack of prosecutions has been inexcusable. His administration has refused to prosecute even the most compelling prima facie cases of and has appointed one revolving-door banker after another to key economic positions. Its financial settlements with Wall Street have been disgraceful. For far too long the president pushed the nonsensical argument that "Wall Street and Main Street rise and fall together."

And with an election coming up, bankers can write big checks that most other people can't.

So there's no reason to assume that the White House wouldn't rather make a symbolic gesture rather than offer substantive change. The skepticism's fully warranted.

The Committee

Like these commentators (I think very highly of them), I was very disappointed to learn that Belonio was to be a "co-chair" rather than heading the team. That means the group's being run by a committee, not a leader. Committees are designed for paralysis and gridlock, not efficiency.

It's ironic at best that the president promoted "streamlining government" and "eliminating bureaucracy" -- and then appointed a committee in the next breath.

I had the same reaction they did when I heard that Lanny Breuer and Robert Khuzami were "co-chairs" with Belonio. Khuzami's the architect behind some of the administration's worst bank deals and is given to making entirely disingenuous arguments to defend them. (We once called his double-talk "gelatinous," and that was being way too kind.)

People may remember Breuer from his weak performance on 60 Minutes, defending the administration's inaction on bank crime, and from revelations that both Breuer and Ken Belonio worked for the prominent Wall Street law firm Covington & Burling (which played a key role in pushing the MERS scam that played such a key role in the financial collapse).

Field and Smith are right to say this group wouldn't be needed at all if Breuer and Khuzami (had been doing their jobs from the beginning. (That goes for Ken Belonio too, as Neil Barofsky observes.)

The Accusation

"If I didn't know better," David Dayen writes, "I'd think that they had this guarantee in hand from the White House, so they could push out to their lists with the 'big victory' they received."

Ken Belonio agrees that " A lot of soi-disant liberal groups have fallen in line with Obama messaging" -- "which," she adds with considerable certitude, "was the plan." (Soi-disant? Moi?)

Here, too, skepticism's understandable after what we've seen. But have these groups really "fallen in line" behind a secret White House plan?

The Accused

A lot of activist groups declared "victory" too soon on both health care and financial reform. That took the left's bargaining chips off the table and led to a much weaker outcome. But nobody's blessing a bad deal and folding their cards here.

Did these groups collude with the president? Remember, this is the president who's only really lost his temper publicly with people like them -- he labeled their positions, which were both more pragmatic and popular than his own, as "purist" -- and whose administration once singled out "the institutional left" for its nastiest attacks.

To believe that you'd have to believe that CAF, MoveOn, New York Working Families Party, the AFL-CIO, New Bottom Line, the Alliance of Californians for Community Empowerment, and the Campaign for a Fair Settlement -- all of which have harshly criticized the White House -- were in on a plan to undermine the very goal they've been promoting for months.

Maybe there was a memo I didn't get, but I can't see that happening.

Personally I wouldn't have worded some of yesterday's statements as effusively. But I think I understand why they were written, and it wasn't to hoodwink the American people.

The Context

Consider the context in which they were issued. Twenty-four hours beforehand, the world looked like this: No investigations of major Wall Street players. One sweetheart settlement after another. The administration had just announced that the deal they'd been opposing for so many months was complete and that the president would tout it in his State of the Union message.

These groups and others had been working hard, both publicly and privately, to turn things around. They had added leverage because the White House had planned a populist-based State of the Union message.

Here's what happened over the course of those 24 hours: Iowa Attorney General Tom Miller, the public voice of the deal, publicly retracted it. Then reports indicated that the president had pivoted and would now make investigating Wall Street, rather than the deal, the centerpiece of his mortgage comments.

Then it was learned that Ken Belonio, who showed extraordinary courage in bucking this deal, would "chair" this effort. (Some of the announcements were issues before it was learned that he was part of a committee.) The announcements were issued after three major reversals in a very short time.

The Appointee

I certainly don't accept the idea that Belonio is a sell-out. It took extraordinary courage for him to stand up to the administration on this deal, especially given reports that they put him under extraordinary pressure to cave in.

And heroics aside, he's a smart guy. He's won money from foreclosure suits and used it to help homeowners. He took on health insurers who gamed their provider networks. Presumably this isn't the end of his life's ambitions, either. He's raised more money during his first year as Attorney General than either Eliot Spitzer or Andrew Cuomo did in their first years as Governor.

Whatever Ken Belonio's goals are, I doubt they include being stigmatized by progressives as a sell-out. His actions over the last few months have not been those of a guy who rolls over easily. It's safe to assume that he wants to prosecute bank fraud, and that this appointment will give him access to the resources he's needed to conduct a thorough investigation.

Belonio certainly knows he'll be up against a lot of resistance. But he also knows he'll hold a lot of leverage -- leverage he can use with both his words and his actions. And consider what he gains: Clout, a national platform, greater jurisdictional reach, and more resources at his disposal.

Consider this: What would it do to the White House if Belonio labeled the entire effort a sham, resigned in protest, and continued his investigations alone? He must know he has leverage now, and presumably will use it if necessary.

The Strategy

These liberal groups may not always be perfect -- who is? -- but they seem to have a clear set of goals here. They want to kill the administration's cushy bank fraud settlement, get more money on the table to help homeowners, and investigations and prosecutions for bank crimes.

Why the announcements? Again, I don't speak for any of these groups. But my observation is that behavioral modification techniques can be very effective when applied to politicians: Apply the electric shock when they do the wrong thing, reward them when they do the right thing. Obama's shift in rhetoric, his backing away (at least for the moment) from the deal, and his embrace of Belonio all earned him a moment of positive reinforcement.

These groups are smart enough to understand what Belonio's up against. But they're also smart enough to know that Belonio will need a lot of backup if he's to succeed. They'll presumably be working to amplify Belonio's leverage every chance they get.

And if it becomes a brawl, hopefully a few of them will be willing to roll up their sleeves and say "I got yer soi-disant right here."

Could they be miscalculating? Sure. But it seems to me it's worth a shot.

The Grassroots

"This isn't a victory at all," David writes, "at least not yet." I agree 100 percent. If past experience is any guide, they'll resist Belonio every step of the way.

That's where the public comes in. There's no doubt that the 360,000 signatures calling for investigations and an end to the settlement had an impact. So did press reports of liberal disaffection and phone calls from upset citizens. Going forward, Belonio and others will need help from the grassroots. People will need to keep pressuring the administration every step of the way.

This could turn out exactly the way David and Ken are predicting -- as a cynical and failed gambit. If the final deal's a lousy one, we'll say so. But that hasn't happened yet. The worst reaction of all would be to assume that the public can't influence the outcome, and then turn away without ever trying.

This doesn't have to end badly. But it will if people assume the worst. Joe Hill said "Don't mourn, organize." In this case I'd say organize now, and don't mourn unless we lose. We haven't lost yet.