Harris Bruises Banks, Burnishes Image With Mortgage Deals
Nine months into her job as California attorney general, Kamala Harris found herself across the table from lawyers for five of the nation’s biggest lenders, trying to hammer out a deal to help mortgage holders weather the foreclosure crisis.
She quickly concluded the proposed terms were too easy on the banks.
“I don’t think we’re going to be able to work this out,” she told one bank’s general counsel at the 2011 talks. Recounting the gamble years later, she said her decision to forgo a $4 billion settlement wasn’t made in haste. “I didn’t walk out of there in a huff and a puff without reflection,” she said. “But it didn’t take long for me to be very clear in my mind.”
Her bet paid off. Five months later, the banks agreed to pay $14 billion more. This month, Harris secured another victory, getting her own $300 million chunk of the landmark $13 billion JPMorgan Chase & Co. mortgage settlement.
Harris hasn’t let up on her effort to chase down wrongdoing tied to the 2008 financial collapse. She is pursuing Standard & Poor’s, accusing it in a $1 billion lawsuit of falsifying ratings on mortgage-backed securities, a claim that may result in triple damages.
A former county prosecutor renowned for going her own way, and the sister-in-law of Tony West, the No. 3 official at the U.S. Justice Department, Harris is wrapping up her third year with a resume that some see as a solid foundation for a leap to higher office.
“Clearly her star is on the rise,” Corey Cook, a University of San Francisco political science professor, said in a telephone interview. Harris is “regarded nationally as one of the leading law enforcement officials of the country.”
Harris, 49, who gave a speech for President Barack Obama at the 2012 Democratic National Convention, is seen as a strong candidate in 2018 to succeed fellow Democrat Jerry Brown after they each serve one more term in their current posts. Such a candidacy would give Californians a chance to elect their first black, female and Indian-American governor.
An early Obama supporter, Harris was in Chicago to celebrate his 2008 election after helping lead his campaign in California. Obama repeatedly asked her if she would consider relocating to Washington, according to a close adviser who asked not to be identified because she wasn’t authorized to speak publicly.
Harris, born in Oakland, California, where she began her career as a prosecutor, said she made a decision the morning after Obama’s election to remain in her home state.
“She’s a front-runner the next time there’s a seat in the governor’s office,” Thad Kousser, a political science professor at the University of California at San Diego, said in a telephone interview.
Harris’s role in the multistate settlement over foreclosure practices in the wake of the 2008 collapse helped make her a national figure.
In February 2012, JPMorgan, Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. reached a $25 billion settlement with 49 states and the federal government to end a probe of abusive foreclosure practices stemming from the collapse of the housing bubble.
Harris said at the time that California would get as much as $18 billion from the accord, which it did.
While that accord helped propel Harris toward a prominent role in this year’s JPMorgan settlement led by the Obama administration, she has been accused by some closer to home of letting her personal politics undermine her official role defending state laws, and for neglecting more bread-and-butter law enforcement issues.
In the 2010 attorney general’s race, Harris beat Republican Steve Cooley, then-Los Angeles district attorney, by less than 1 percent. She won 20 of the state’s 58 counties, particularly the more populous and liberal ones along the coast.
John Eastman, a professor at Chapman Law School who lost the Republican primary to Cooley, said Harris’s politics drive her legal agenda. He cites her refusal to defend Proposition 8, the 2008 voter-approved initiative banning gay marriage that was set aside by the U.S. Supreme Court on procedural grounds.
Her legal analysis was “based on her policy preferences rather than the law,” Eastman said in a phone interview.
Harris said it was her duty to uphold the principle of equal treatment under the law.
“Yeah, I didn’t defend it,” she said of Proposition 8. “It’s against the Constitution of the United States.”
The targets of her 1,184-lawyer office have included some of the state’s biggest technology companies. Last year she prodded Apple Inc. and Google Inc. to develop an industry protocol giving consumers more control over personal information when they use smartphones and tablets.
She also stepped up antitrust scrutiny of Silicon Valley, probing Mountain View, California-based Google over dominance of Internet search and appealing a decision throwing out a lawsuit over EBay Inc.’s hiring practices.
Harris’s interest in technology extends to modernizing the way law enforcement uses it.
Sitting at her desk, she imitates the crackling of a patrol officer’s radio in a wind and rain storm as she describes the need for a failsafe way to quickly communicate information on suspects. She worked with the San Francisco Police Department to develop “Justice Mobile,” an application for accessing criminal records on smartphones that is used by about 140 cities and counties.
“The patrol officer on his smartphone goes into the mobile app, puts this guy’s information in, boom! Gets it right there, right in front of him -- doesn’t have to make sure he heard it correctly and transmitted the information correctly -- it’s right there in real time,” she said.
Some in law enforcement haven’t been as appreciative of her efforts on their behalf, focusing instead on budget cuts that have hobbled local agencies.
After Harris took office, a $70 million reduction gutted the state’s Bureau of Narcotics Enforcement, the oldest drug enforcement agency in the U.S. While the budget decision was ultimately the governor’s, Harris should have done more, said John McGinness, a retired Sacramento County sheriff who is now a consultant to police officer unions.
“I think a little harder fight there would’ve been more appropriate for the state,” McGinness said in a phone interview. Harris said she asked Brown to revisit funding for the bureau, which helps rural counties fight organized gangs that cook and sell methamphetamine.
Harris graduated from Howard University in Washington and earned a law degree at the University of California at Hastings in San Francisco.
She said she took an early interest in civil rights from her mother, Shyamala, a cancer researcher born in India who died in 2009, and her Jamaican-born father, Donald, a retired Stanford University economics professor, who met as graduate students at University of California at Berkeley.
Her younger sister, Maya Harris West, was the executive director of the American Civil Liberties Union of Northern California and is now a vice president at the Ford Foundation.
As a deputy district attorney in Alameda County, Kamala Harris specialized in child sexual assault cases, a focus she carried into her two terms as the elected district attorney of San Francisco. As attorney general, she defended a voter-approved initiative targeting sex offenders and human traffickers.
One of Harris’s biggest tasks as she enters the last year of her first term is guiding her case against S&P. The ratings company has been strongly contesting lawsuits by a dozen states, and an unprecedented $5 billion suit by the U.S. government.
California’s case against the firm and its parent, McGraw Hill Financial Inc., differs from those by the U.S. and other states because it includes an allegation the ratings company used false statements about mortgage-backed securities to defraud, which if proven would allow her to seek $3 billion.
Harris is seeking to hold S&P responsible for losses by state pension funds that bought mortgage-backed securities that were awarded AAA ratings.
California’s case remains in state court in San Francisco, while McGraw Hill won consolidation of the other state suits in federal court in Manhattan, where it’s based. A status hearing on Harris’s case is scheduled for Dec. 9.
Harris said she might not have been able to bring the S&P case if she had consented during the 2011 talks to broad liability waivers protecting banks from further claims over lending and securitization.
She declined to elaborate on how her refusal to provide waivers produced what she called “stepping stones” to the S&P suit, saying the investigations are still active.
“There were so many abuses in the mortgage origination and securitization process that there should be a lot of evidence of wrongdoing that could be available,” said Tabacco, who is pursuing his own case against S&P and Moody’s Corp. based on a claim of negligent misrepresentation.
The ratings companies have denied the allegations.
Harris may be able to use the mortgage settlements, and her continuing efforts in the financial arena, to remind voters of what she did to help struggling homeowners, Kousser, the political scientist, said.
“It shows that she was actively engaged in the housing crisis, perhaps the biggest economic, legal and political issue of the past half-decade,” he said.
Any political ambition may also be helped by her decade-long connection with Obama. Harris said she and the president have a “longstanding relationship of supporting each other and being friends.”
In 2004, she hosted a fundraising party in San Francisco for Obama when he was running for a U.S. Senate seat representing Illinois. She also knocked on doors in the snow in Iowa during his 2012 re-election campaign. Obama, in turn, asks to meet with her when he comes to California, and has helped with fundraising to erase her campaign debt, Deborah Mesloh, an adviser and friend of Harris, said.
At a San Francisco-area gathering in April, Obama created a stir when he said Harris “happens to be by far the best-looking attorney general in the country.”
Obama later called her to apologize “for creating this distraction,” the White House said at the time.
Joanna Rosholm, a spokeswoman for Obama, declined to comment on Harris or whether she had been asked to join the administration.
With no Republican opponent yet in next year’s election, Harris’s $2.7 million campaign chest tops that of any candidate at this point in the 2010 race. Mesloh said it was “traumatizing” during the final 10 days of that race when groups linked to Republican fundraisers Karl Rove and Ed Gillespie spent more than $1.5 million trying to defeat her.
As attorney general, Harris helped obtain a $1 million settlement in October with two Arizona-based political groups that have ties to billionaire energy executives Charles and David Koch. The agreement resolved claims the groups violated California campaign finance laws by concealing the origin of $15 million in donations to conservative causes in the 2012 election.
A November 2011 survey of 500 California voters found that while 33 percent approved of Harris’s performance and 26 percent disapproved, 41 percent said they weren’t sure, according to the data compiled by Public Policy Polling.
“She’ll need to start not only trumpeting her resume but sharing her story so Californians like her and feel comfortable with her as a leader,” said Kousser.
Harris, who never married, spoke publicly at her inauguration for the first time about her mother’s influence, said Mesloh.
Her mother, at Berkeley in the late 1960s, reneged on a promise to her parents to return to India after graduate school to settle into an arranged marriage, Harris said at the time.
“It turned on a courageous choice,” Harris said. “Going back against the traditions of her family dating back to 500 B.C., my mother chose to pursue a marriage based on love.”
Kousser said that Harris will need to reveal even more of herself and her background if she wants to take the next step.
“You can be fairly private and make it to a certain level in politics,” he said. “But if you want to be governor, people are going to have to get to know you.”
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