Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Banks in Crosshairs as Coakley Pushes Mortgage Relief

Massachusetts Attorney General Martha Coakley
Massachusetts Attorney General Martha Coakley said, “Wall Street doesn’t understand jail. Wall Street understands losing their bonuses.” Photographer: Scott Eisen/Bloomberg

Martha Coakley, the Massachusetts attorney general whose 2010 U.S. Senate loss cost Democrats a filibuster-proof majority, has been clawing back political respect by declaring a one-woman war on Wall Street’s role in the collapse of the housing market.

The loss for her party, it turns out, was her state’s gain.

Coakley, the first woman to occupy her post, used the defeat to redouble efforts as Massachusetts’s top law enforcement officer. She got hundreds of millions of dollars in settlements with Morgan Stanley, Royal Bank of Scotland Group Plc and Option One. She objected to industry-friendly terms in a national foreclosure accord while suing the banks herself. She joined a state-federal probe of the housing bust and held up a Bank of America Corp. deal until the lender offered $3 billion in additional relief. Reforming bank practices after the recession requires “severe” financial penalties, she said.

“Wall Street doesn’t understand jail,” Coakley said in an interview. “Wall Street understands losing their bonuses.”

Nina Simon, litigation director at the Center for Responsible Lending in Washington, a nonprofit group that fights predatory consumer lending, said Coakley has helped lead a small group of state attorneys general still seeking redress for homeowners affected by the subprime mortgage debacle.

“She is one of the leading AGs on this issue in trying to get redress for people for the various causes of the housing crisis,” Simon said of Coakley, who turned 59 on July 14.

Foreclosure Settlement

In February, Massachusetts was one of 49 states to sign on to a $25 billion foreclosure settlement with the banks. By July 31, both houses of Massachusetts’s legislature must approve a final version of a bill championed by Coakley and opposed by the financial industry that would force banks to provide loan modifications to borrowers.

Taking the podium before a group of bankers in May, she delivered a clear message: She isn’t done with the mortgage industry.

Coakley was making her case for the proposed law, opposed by the Massachusetts Bankers Association. It aims to prevent foreclosures by requiring lenders to modify home loans. Coakley wants banks to stop what she calls unnecessary foreclosures and help the state recover from the housing bust.

“If you can keep someone in their home and it’s commercially reasonable, that is what you should do,” Coakley told the bankers’ conference. “We’re not asking banks to lose money. We’re not saying anybody should get a handout.”

Career in Doubt

Coakley’s failure two years ago to win the U.S. Senate seat left vacant by Senator Edward M. Kennedy’s death drew the ire of fellow Democrats nationwide and left her career prospects in doubt. The loss to now-Senator Scott Brown upended national and state politics, handing the seat that was Kennedy’s for almost 47 years to a Republican.

A poll by Suffolk University in Boston after the election showed 52 percent of Massachusetts voters viewed Coakley unfavorably.

“A lot of people were writing her political obituary,” said Kevin Conroy, who worked for Coakley in the attorney general’s office and managed her Senate campaign. “There was a general feeling she wouldn’t be able to recover from this.”

Two years later, Coakley has rebounded. A University of New Hampshire poll in March found she was the most popular politician in Massachusetts. Her favorability rating had risen to 62 percent. That was higher than Brown and fellow Democrats including Governor Deval Patrick, Senator John Kerry and Elizabeth Warren, who is challenging Brown for his Senate seat in the Nov. 6 election.

Succeed Patrick

Coakley would also beat Democratic rivals in a primary race to succeed Patrick as governor, a Suffolk University poll found.

“She got a chance to reinvent herself as a candidate and kind of make amends for what many prominent national Democrats had said about her,” said David Paleologos, director of the Suffolk University Political Research Center. “She had to do a gut check. She had to reach back and do what she needed to do to make good on herself and her campaign. And she did it.”

After graduating from Boston University School of Law in 1979, Coakley worked at two law firms, including Goodwin Procter LLP, then in 1986 joined the district attorney’s office for Middlesex County, which includes Cambridge. She served as an assistant district attorney in Lowell, a city north of Boston, where she prosecuted drunken driving, domestic violence and drug cases.

She left the following year to join the U.S. Justice Department. After a stint with the department’s Organized Crime Strike Force, she returned to the district attorney’s office, rising to chief of the child-abuse unit.

Louise Woodward

In 1997, she found herself in the national spotlight when she prosecuted British nanny Louise Woodward for the death of an 8-month-old boy. Woodward was convicted of second-degree murder, which was later reduced to involuntary manslaughter by a judge.

Coakley got her first experience as a political candidate that same year, losing a race for state representative. She ran for district attorney the following year and won.

After eight years as Middlesex County district attorney, she was elected attorney general in 2006.

In the 2010 race to fill Kennedy’s seat, she sailed through the primary, beating U.S. Representative Michael Capuano. In heavily Democratic Massachusetts, the primary win made her the early favorite, said Maurice Cunningham, a political scientist at University of Massachusetts-Boston.

Facing Brown

Brown was a relatively unknown state senator from the suburbs, while Coakley had statewide name recognition as attorney general, Cunningham said. One poll showed her with a 15-point lead going into the race.

Brown surged, denouncing President Barack Obama’s health-care legislation, as Coakley stumbled. She came off as aloof and unengaged with voters, at one point scoffing at the idea of going to an outdoor hockey game at Fenway Park, home of the Boston Red Sox, to shake hands with voters in the cold as Brown did, Cunningham said.

“She had a distance to her and lack of engagement,” Cunningham said. “He seemed to be everywhere, and she seemed to be nowhere.”

Conroy, her campaign manager, blamed voter anger over the economy and the health-care bill. The campaign should have acknowledged the anger and better explained the proposal, he said.

First Republican

Brown won with 52 percent of the vote to Coakley’s 47 percent. The loss cost Democrats the 60-vote majority needed to advance legislation in the U.S. Senate and put Republicans on the offensive. Brown was the first Republican elected to the U.S. Senate from Massachusetts since 1972.

“Right after the election people assumed she would finish her term and be done with politics,” Cunningham said.

Coakley faced a Republican challenger for attorney general 10 months after the January 2010 Senate loss. She had to rebuild her reputation and convince voters that she wasn’t taking them for granted.

Giving up wasn’t an option, Coakley said.

“What was the alternative?” she said in an interview in her office. “Go home and say, ‘Oh well,’ and sulk in your room? That’s not my style. I didn’t lose a case in court and then say, ‘Oh I can never do this again.”’

Coakley said she got a morale boost as she campaigned one day outside a supermarket in a Boston suburb where a man commended her work as attorney general even though he voted for Brown for the Senate.

Turning Point

“That was the first indication to me that in the public’s mind at least, there were a lot of reasons why I might have lost that didn’t have anything to do with my job or what I’ve done as AG, and it gave me a glimmer of hope that, ‘OK I can get this back and get re-elected,”’ she said.

That’s what happened. Coakley beat Republican challenger Jim McKenna, who got on the ballot after being a write-in candidate in the primary. She won with more than 60 percent of the vote in the general election.

“She went back to doing her job, and she went back to doing it well,” said Frank Talty, director of the Center for Public Opinion at the University of Massachusetts-Lowell. “People saw she was doing her job as attorney general, and it didn’t appear to people she was doing it for higher office.”

Since her failed Senate run, mortgage lenders -- and the damage done to Massachusetts residents struggling to keep their homes -- have been one of Coakley’s primary targets.

Bank Settlements

She reached a $102 million settlement with New York-based Morgan Stanley in 2010 over its role in financing and securitizing subprime loans. Settlements with Edinburgh-based Royal Bank of Scotland and lender Option One followed in 2011.

Coakley balked at joining a multistate settlement with the Countrywide Financial unit of Charlotte, North Carolina-based Bank of America until the lender offered $3 billion in additional relief for homeowners, according to her office.

And in December, she drew national attention when she sued Bank of America, as well as JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.’s GMAC Mortgage unit, for allegedly deceiving homeowners seeking loan modifications and conducting illegal foreclosures.

Federal agencies and state attorneys general were negotiating at the time with the lenders over foreclosure abuses in an effort to reach a national settlement.

Acceptable Deal

Coakley said she sued because she didn’t see an acceptable deal in sight. During the talks, she was among a handful of attorneys general, including Eric Schneiderman of New York and Kamala Harris of California, who opposed any agreement shielding banks from future investigations into their mortgage operations.

“They’re just so big that if they’re getting away with something and no one stops them, they keep getting away with it,” Coakley said of the banks. “Our cities and towns and neighborhoods and the people in them are being affected every single day by the callousness.”

Coakley has clashed with the industry over her state foreclosure bill, which passed the Massachusetts House and Senate. A conference committee must unify two versions of the bill in time for a July 31 voting deadline by the legislature.

The proposal is intended to reduce foreclosures by modifying loans and providing affordable payments to homeowners struggling to keep their homes.

Banks would be required to offer a modification to a borrower when the value was higher than a foreclosure, according to Adam Martignetti, chief of staff for the legislature’s Joint Committee on Financial Services.

Certain Mortgages

Only certain mortgages considered risky would be eligible for mandated modification. The Senate bill adds an additional requirement. Lenders, before foreclosing on any loan, must offer mediation with borrowers to negotiate on a modification.

Kevin Kiley, executive vice president and chief operating officer of the state bankers’ association, said the legislation goes too far in requiring modifications.

Lenders should have the discretion to foreclose when homeowners default, he said. He claimed that a mediation requirement would delay foreclosures and add to bank costs.

The organization warned lawmakers that banks could face more litigation under the law and that foreclosure delays hurt the housing market.

Coakley said modifications are needed to stabilize the market. Banks’ voluntary actions aren’t enough, and the bill “forces lenders to make good on the promises they failed to live up to,” she told the finance committee last year.

Help Homeowners

Coakley has hired specialists to help homeowners obtain mortgage relief and monitor bank compliance with promises under the national settlement to modify loans.

The group, HomeCorps, had more than 2,300 cases and helped 150 homeowners obtain temporary or permanent loan modifications through June, according to her office.

Coakley has also joined federal and state authorities in an investigation of any misconduct in the bundling of mortgage loans into securities during the housing boom.

“If you want to come in and get a result, you have to have the ammunition,” she said. “You have to have the facts, and you have to be prepared to back it up.”

Coakley’s comeback has stirred speculation about her political future. Paleologos of Suffolk University said she might be able to tap her popularity to make a successful run for governor -- or even another try for the U.S. Senate.

Gubernatorial races by her recent predecessors, Tom Reilly and Scott Harshbarger, may argue against Coakley’s seeking higher office. Both lost.

Coakley said she won’t run for governor, and when asked about another run for Senate, she called the question “too speculative.” She said her sights are on the next campaign for attorney general in 2014.

“It’s important to have women running for office,” said Coakley, who is the lone woman on a wall of photos of previous attorneys general in her Boston office. “It’s important to have women in public life out winning and losing and getting back up again and getting back into the fight.”

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.