EDITORIAL : THE NEW YORK TIMES, USA

Banks Are Off the Hook Again

Americans know that banks have mistreated borrowers in many ways in foreclosure cases. Among other things, they habitually filed false court documents. There were investigations. We’ve been waiting for federal and state regulators to crack down.

Prepare for a disappointment. As early as this week, federal bank regulators and the nation’s big banks are expected to close a deal that is supposed to address and correct the scandalous abuses. If these agreements are anything like the draft agreement recently published by the American Banker — and we believe they will be — they will be a wrist slap, at best. At worst, they are an attempt to preclude other efforts to hold banks accountable. They are unlikely to ease the foreclosure crisis.

All homeowners will suffer as a result. Some 6.7 million homes have already been lost in the housing bust, and another 3.3 million will be lost through 2012. The plunge in home equity — $5.6 trillion so far — hits everyone because foreclosures are a drag on all house prices.

The deals grew out of last year’s investigation into robo-signing — when banks were found to have filed false documents in foreclosure cases. The report of the investigation has not been released, but we know that robo-signing was not an isolated problem. Many other abuses are well documented: late fees that are so high that borrowers can’t catch up on late payments; conflicts of interest that lead banks to favor foreclosures over loan modifications.

The draft does not call for tough new rules to end those abuses. Or for ramped-up loan modifications. Or for penalties for past violations. Instead, it requires banks to improve the management of their foreclosure processes, including such reforms as “measures to ensure that staff are trained specifically” for their jobs. The banks will also have to adhere to a few new common-sense rules like halting foreclosures while borrowers seek loan modifications and establishing a phone number at which a person will take questions from delinquent borrowers. Some regulators have reportedly said that fines may be imposed later.

But the gist of the terms is that from now on, banks — without admitting or denying wrongdoing — must abide by existing laws and current contracts. To clear up past violations, they are required to hire independent consultants to check a sample of recent foreclosures for evidence of improper evictions and impermissible fees.

The consultants will be chosen and paid by the banks, which will decide how the reviews are conducted. Regulators will only approve the banks’ self-imposed practices. It is hard to imagine rigorous reviews, but if the consultants turn up problems, the banks are required to reimburse affected borrowers and investors as “appropriate.” It is apparently up to the banks to decide what is appropriate.

It gets worse. Consumer advocates have warned that banks may try to assert that these legal agreements pre-empt actions by the states to correct and punish foreclosure abuses. Banks may also try to argue that any additional rules by the new Consumer Financial Protection Bureau to help borrowers would be excessive regulation.

The least federal regulators could do is to stress that the agreements are not intended to pre-empt the states or undermine the consumer bureau. If they don’t, you can add foreclosure abuses to other bank outrages, like bailout-financed bonuses and taxpayer-subsidized profits.

Justice Kagan Dissents

In the Supreme Court’s 5-to-4 ruling about a school-choice program in Arizona, Justice Anthony Kennedy’s opinion leaves intact a program that has disbursed almost $350 million of state funds, most of it to schools choosing students on the basis of religion.

The holding all but overrules a landmark decision of the Warren court,Flast v. Cohen. As Justice Elena Kagan says powerfully in her first dissent “by ravaging Flast in this way,” the majority “damages one of this nation’s defining constitutional commitments.”

The First Amendment’s establishment clause — “Congress shall make no law respecting an establishment of religion” — is meant to protect citizens even when they are not harmed. Before, under Flast, a taxpayer could ask a court to enforce this central right. Now, under this ruling, a taxpayer all but can’t, and any government can use the tax system to avoid challenges to financing of religion.

The only difference between cases considered under Flast since 1968 and the current one is the means of government spending. In past cases, it has come through appropriations. In this case, the money comes through a tax credit: any taxpayer can redirect up to $500 of what he or she owes the state to a nonprofit that uses the money for scholarships. What the court calls a tax credit and Arizona calls a voluntary cash contribution is, concretely, a redirected tax payment.

Justice Kennedy, in an opinion clearly intended to overturn legal precedent, says that the program’s financing comes from taxpayers taking advantage of this credit, not from the state, so the taxpayers bringing the lawsuit can claim no harm from the state and lacked standing to sue. To Justice Kagan, “this novel distinction,” has “as little basis in principle as it has in our precedent.” Whether a state finances a program with cash grants or targeted tax breaks, the effect is the same. Taxpayers bear the cost.

Since the Flast case, she writes, “no court — not one — has differentiated between these sources of financing in deciding about standing.” In five cases where taxpayers challenged tax expenditures, the court has dealt with the merits “without questioning the plaintiffs’ standing.” The court has relied on some of these decisions as “exemplars of jurisdiction” in other cases. (“Pause on that for a moment,” the justice entreats.)

When this case was argued last fall the convolutions of the Arizona program seemed intended to mask its violation of the Constitution. The court’s ruling is another cynical sleight of hand, which will reduce access to federal courts while advancing endorsement of religion.

What Happened to the Investigation?

Last summer the House Ethics Committee accused Representative Maxine Waters of bringing discredit on Congress by helping to secure a government bailout for a troubled bank where her husband held stock and had been a director. Ms. Waters, a California Democrat, angrily denied the charge and demanded a public hearing.

Nothing has happened since — except key committee investigators were placed on administrative leave. The public needs to know the full story. Has Ms. Waters violated ethics rules or worse? Did the investigators make a major error? Or did someone want them muzzled?

The public record does not look good for Ms. Waters. A recent report by The Washington Post found that federal bank examiners had complained to superiors of political interference and called the bailout of Boston-based OneUnited Bank “a travesty of justice.”

Examiners found that the bank’s chairman had rendered it insolvent through bad investments and lavish personal spending. Representative Waters arranged a Treasury Department meeting attended largely by officials from OneUnited, according to investigators. Soon after, the bank won a $12 million bailout.

The Ethics Committee charged that Ms. Waters used her office improperly — that while she had been cautioned not to get involved by Representative Barney Frank, chairman of the Financial Services Committee, she did not stop her chief of staff from continuing to seek assistance.

Ms. Waters insists that she sought the meeting with Treasury officials to help not just OneUnited, but all minority-owned banks sideswiped by the financial crisis. The reputation of the bipartisan Ethics Committee can only sink lower if the case continues to drift.

The Truth About Charley

Bill Steigerwald has made an intriguing, if disheartening, discovery that seems to have eluded admirers and scholars of John Steinbeck for decades. Steinbeck’s “Travels With Charley in Search of America” is shot through with dubious anecdotes and impossible encounters.

Mr. Steigerwald, a former newspaperman, said he was planning to pay respectful tribute last year when he retraced Steinbeck’s 1960 journey — 10,000 miles from Long Island to Maine to California and back. But as he explained in a blog and an article in this month’s Reason magazine, facts got in the way.

He checked the book against Steinbeck’s actual itinerary, letters from the road, the book’s draft and revisions. They convinced him that Steinbeck misrepresented dates and places and had not spent all that time alone with his dog. His wife, Elaine, was along for most of the trip; they often stayed in deluxe hotels and camped hardly at all.

This might not flabbergast anyone who has read the book lately. It is full of improbably colorful characters and hard-to-swallow dialogue straight out of a black-and-white 1960s TV show. “What’s the matter with you, Mac, drunk?” says a red-faced New York cop. “You can just rot here,” says a forlorn young man in the Rockies who wears a polka-dot ascot and dreams of being a beautician in New York. “Flops. Who hasn’t known them hasn’t played,” says a traveling Shakespearean actor in North Dakota.

One especially incredible melodrama is set in New Orleans. It is a meditation on racism with a scary white bigot, a white moderate and two emblematic African-Americans: a timid, weather-beaten field hand and a bold young student who is tired of the boycotts and sit-ins.

It is irritating that some Steinbeck scholars seem not to care. “Does it really matter that much?” one of them asked a Times reporter.

Steinbeck insisted his book was reality-based. He aimed to “tell the small diagnostic truths which are the foundations of the larger truth.” Books labeled “nonfiction” should not break faith with readers. Not now, and not in 1962, the year “Travels With Charley” came out and Steinbeck won the Nobel Prize for literature.