Seventeen of the nation’s “too big to fail” banks also apparently think they are “too big to lose in court.” They have joined forces to go up against a federal judge whose rulings they simply don’t like. In doing so, the banks may have opened a Pandora’s box that ultimately could benefit the same group of people they have been going after – homeowners facing default on their mortgage.
First the back story: A bunch of corporate attorneys representing JP Morgan Chase, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley and Barclays, to name a few, recently took on U.S. District Court Judge Denise Cote by filing what is known in legal jargon as a “writ of mandamus” the purpose of which is to toss out a number of rulings she has made regarding the discovery process. Someone who believes they are denied a legal right generally files such a writ. That’s a bold step to take against a member of the judiciary who holds your case in her hands. And, even bolder because of whom filed it. But if it works for them, what’s not to say it will not work for attorneys seeking to preserve the due process of homeowners who have been whisked through the courts like cattle off to slaughter? Known as a no-nonsense judge who emphasizes efficiency in large, complex cases, Cote is handling one of the highest-stakes cases against the banks to date. The lawsuit, which was brought against the banks by the Federal Housing Finance Agency, alleges that the banks duped it into buying $200 billion inmortgage-backed securities without revealing the sloppy underwriting job. The agency, which oversees Fannie Mae and Freddie Mac, wants the banks to repurchase the bad loans. So far, the case has been going a lot better for FHFA than for the banks as Cote has continued to reject all of the defenses raised by the banks — thus, the banks’ decision to take aim at the judge. The corporate attorneys filing the writ make a half-baked attempt to sugar-coat the petition acknowledging that “Judge Cote is an experienced member of the judiciary” but then come back hard noting that her “open efforts in these actions toward coercing settlement, combined with the repeated denial of petitioners’ basic due process rights to defend against these claims, are unprecedented.” The key words in the petition are “denial of basic due process,” truly an ironic twist given that banks have done nothing but deny homeowners their “basic due process” by shoving foreclosures through the courts via rocket dockets. The very construct of a 15-minute trial is a joke and a violation of due process, yet that is exactly what is happening in our judiciary as homeowners are whisked through the process and tossed to the curb. During a recent court hearing, a visiting judge unfamiliar with the rocket docket process referred to the proceedings as a “kangaroo court.” His comment rings strikingly close to what these banks’ attorneys are suggesting. Now that the banks have opened this Pandora’s box with their writ of mandamus, those in the business of defending foreclosure victims no doubt will do whatever is in their power to keep that lid from slamming shut. By Roy Oppenhiem