We were renters for most of my childhood, and my mother took incredible pride in our home. It was always ready for company, with fresh-cut flowers. The walls were decorated with big posters of artwork by LeRoy Clarke and other artists from the Studio Museum in Harlem, where Uncle Freddy worked. There were statues from her travels in India, Africa, and elsewhere. She cared a great deal about making our apartment a home, and it always felt warm and complete. But I knew my mother always wanted something more. She wanted to be a homeowner.
She would be the first to point out the practical considerations—that it was a smart investment. But it was so much more than that. It was about her earning a full slice of the American Dream.
My mother had wanted to buy her first home while Maya and I were still young—a place to grow up with a sense of permanence. But it would take many years before she could save up enough money for a down payment.
I was in high school when it happened. Maya and I had just gotten home from school when she pulled out the pictures to show us—a one-level dark-gray house on a cul-de-sac, with a shingled roof, a beautiful lawn in front, an outdoor space on the side for a barbecue. She was so excited to show us, and we were so excited to see it—not only because it meant we got to move back to Oakland, but because of the intense joy we saw in her face. She had earned it, quite literally. “This is our house!” I would tell my friends, proudly showing off the pictures. It was going to be our piece of the world.
That memory was on my mind when I traveled to Fresno, California, in 2010, in the midst of a devastating foreclosure crisis in which so many people had their own piece of the world destroyed.
Fresno is the largest city in California’s San Joaquin Valley, an area that has been described as the “Garden of the Sun.” The San Joaquin Valley is one of the world’s most abundant agricultural regions, providing a significant share of the fruits and vegetables consumed in the United States. Amid the acres of almond trees and vineyards full of grapes live about four million people, a population roughly the size of Connecticut’s.
Many middle-class families saw a life in Fresno as their best shot at the American Dream. It was a place with promise, a place where they could afford a real single-family home on a suburban street, a place that represented America’s vitality, mobility, and hope. In the early 2000s, the population of the San Joaquin Valley was young and growing, and nearly 40 percent Latinx. For so many people who moved there, the six-hour round-trip commute to their jobs in San Francisco or Sacramento was exhausting, but a worthy price to pay for what they got in exchange: the sense of dignity, pride, and security that came with becoming an American homeowner.
New suburban developments seemed to sprout up every month, taking root in the fertile soil as if they were another cash crop. That wasn’t far off. Fresno’s real estate boom was fueled by broader economic trends, trends that ultimately sparked an economic inferno.
In the wake of 9/11, central banks around the world slashed their interest rates. This capital-rich environment prompted lenders to become increasingly aggressive, luring more and more borrowers with enticing loan offers like “interest only,” “zero down,” and even “NINJA” (no income, no job, no assets). High-risk subprime mortgages flooded the housing market, with teaser rates seemed too good to be true. Lenders reassured home buyers (and themselves) that homeowners would just refinance their mortgages before their payments spiked. The reward was worth the risk, because, as they saw it, housing prices were only and always destined to go up.
Meanwhile, global investors were on the hunt for greater returns, which led them toward ever riskier opportunities to place their bets. Wall Street financiers were only too happy to meet this voracious demand, creating newfangled securities backed by the same deeply questionable mortgages. Investors who bought those mortgaged-backed securities believed that the banks had done their due diligence, only bundling together home loans that could and would be paid on time. Few realized they were actually purchasing ticking time bombs.
Remarkably, about half of all of these mortgage-backed securities ended up on the balance sheets of big banks after they realized that holding the securities, rather than the mortgages themselves, would help them avoid traditional regulation. The cycle fed on itself, spinning faster and faster, until it spun right off the rails. In 2006, the housing market peaked. A major housing crisis loomed.
Banks and investors tried to dump their bad securities, which only made things worse. Wall Street started to implode. Bear Stearns failed. Lehman Brothers filed for bankruptcy. Credit started drying up. The economy went into freefall. By 2009, homes in the Fresno area had lost more than half their value, the largest decline in the nation. At the same time, people living in Fresno were losing their jobs in droves; by November 2010, the unemployment rate had soared to 17 percent.
Meanwhile, the teaser rates on loans had expired, and borrowers’ mortgages were doubling. Scam artists and fraudsters descended like vultures, promising frantic homeowners relief from foreclosure, only to take their money and run.
This happened all over the country. Consider the story of Karina and Juan Santillan, who bought a home twenty miles east of Los Angeles in 1999. Juan had worked for twenty years at an ink-manufacturing plant, while Karina sold insurance. “A few years after they bought their home, the Santillans say, people started knocking on their door selling financial products,” The Atlantic reported. “It was easy money, the Santillans were told. Borrow against your house, it’s sure to gain value.” Like millions of Americans, the Santillans were persuaded to take out an adjustable-rate mortgage on their home. At the time, their monthly payment was $1,200. By 2009 it had risen to $3,000—and Karina had lost her job. Suddenly at risk of losing their house, they contacted a company that promised to protect them. After paying $6,800 for services that were supposed to help, they realized they had been scammed. Ten years after purchasing their home, they were forced to tell their four children they were going to have to leave.
This pattern played out with particular force in Fresno and Stockton. Local leaders pleaded with the federal government to declare the region a disaster area and send help. “Disaster area” was an apt description: entire neighborhoods were abandoned, and the area was suffering one of the highest foreclosure rates in the nation. Sometimes families were struggling so hard to pay their mortgages that they would abruptly pick up and leave. I heard stories of pets being abandoned because their owners could no longer afford to keep them—a phenomenon the Humane Society was reporting all across the country, from Little Rock to Cleveland to Albuquerque. When I visited Fresno, I was told that abandoned dogs had been seen roaming in packs. I felt like I was walking through the aftermath of a natural disaster. But this disaster was man-made.
When the crash finally bottomed out, 8.4 million Americans nationwide had lost their jobs. Roughly 5 million homeowners were at least two months behind on their mortgages. And 2.5 million foreclosures had been initiated.
Two and a half million foreclosures initiated. There is something clinical about saying it that way. Something that makes the human tragedy and trauma seem abstract.
Foreclosure is not a statistic.
Foreclosure is a husband suffering in silence, knowing he’s in trouble but too ashamed to tell his partner that he has failed. Foreclosure is a mother on the phone with her bank, pleading for more time—just until the school year is over. Foreclosure is the sheriff knocking at your door and ordering you out of your home. It is a grandmother on the sidewalk in tears, watching her life’s possessions being removed from her house by strangers and left exposed in the yard. It is learning from a neighbor that your house was just auctioned off on the steps of City Hall. It is the changing of locks, the immolation of dreams. It is a child learning for the first time that parents can be terrified, too.
Homeowners told me countless stories of personal catastrophe.And as the months dragged on, the news media continued to surface strange reports about irregularities in the foreclosure process. We learned about people whose banks couldn’t find their mortgage documents. There were stories of people discovering that they actually owed tens of thousands of dollars less than the banks said they did. A man in Florida had his house foreclosed on and put up for sale—even though he’d bought the house with cash and never had a mortgage.
Tales emerged of a process that became known as dual tracking. Through a program with the federal government, banks were working with borrowers on one track to modify loan terms, which was supposed to make it easier for people to stay in their homes. But often borrowers were working on a second track, too, foreclosing on homes anyway, even after making such modifications, even after the homeowner had spent several months paying the new reduced amount. The banks left homeowners with no explanation, no point of contact, and no recourse.
Clearly, something had gone awry. But it wasn’t until the end of September 2010 that a major part of the scandal would break wide open. That was when we learned that the country’s largest banks—including Bank of America, JPMorgan Chase, and Wells Fargo—had been illegally foreclosing on people’s homes since 2007, using a practice that became known as “robo-signing.”
We learned that to speed up the foreclosure process, financial institutions and their mortgage servicers hired people with no formal financial training—from Walmart floor workers to hair stylists—and placed them in “foreclosure expert” positions with one responsibility: sign off on foreclosures by the thousands.
In depositions, robo-signers acknowledged that they had little or no familiarity with the documents they were paid to approve. The job wasn’t to understand and evaluate; it was simply to sign their name, or to forge someone else’s. They got paid $10 an hour. And they got bonuses for volume. There was no accountability. No transparency. None of the due diligence required by law. From the banks’ point of view, the faster they got bad loans off their balance sheet, the faster their stock price would rebound. And if that meant breaking the law, so be it. They could afford the fine. It was painful to me when I realized that the banks viewed a fine as just the cost of doing business. It became clear to me that they had built it into their bottom line. It was a damning portrait of an aspect of Wall Street culture that persists, the part that seems to care little—if at all—about the collateral damage caused by recklessness and greed.
I had seen it up close in the district attorney’s office, where we’d prosecuted mortgage scammers for defrauding the elderly and veterans. In 2009, as DA, I created a mortgage fraud unit to fill in the areas of chronic under-enforcement by the federal government. But as the foreclosure crisis ballooned, I was eager to take on bigger culprits, to go after the bad-acting banks themselves. And it seemed I might have a chance.
On October 13, 2010, the attorneys general of all fifty states agreed to join together in what’s known as a multistate investigation. It was billed as a comprehensive, nationwide law enforcement effort to uncover the banks’ actions in the foreclosure crisis.
I was eager to join the fight, but there was just one small problem: I wasn’t yet California’s attorney general.
I was in the middle of my campaign when the multistate was announced, and there were still three weeks left until Election Day. The polls were predicting a very close race.
On Election Night 2010, I lost the race for attorney general. Three weeks later, I won.
I’d started the evening with what had become a ritual: a friends-and-family dinner. Then we headed to the Election Night party, which we held on the San Francisco waterfront, in the headquarters of my dear friend Mimi Silbert’s Delancey Street Foundation—a leading residential self-help and job training organization for addicts, substance abusers, the formerly incarcerated, and others trying to turn their lives around. We arrived as results started to trickle in from precincts around the state. In the main room, supporters were gathered, waiting in anticipation for the results. Behind them stood risers for TV cameras and press pointed at the stage. We went in through the back and into a side room where my staff was gathered. They had arranged four tables into a square, and most of them were sitting there, staring at their laptops, hitting refresh on the websites keeping track of the tally. I greeted everyone, my spirits high, and thanked them for all their hard work.
Then Ace Smith, my chief strategist, pulled me aside.
“How’s it looking?” I asked.
“It’s going to be a very long night,” Ace said. My opponent was in the lead.
I’d always known that I could take nothing for granted. Even plenty of fellow Democrats had considered me a long shot, and some hadn’t held back in saying so. One longtime political strategist announced to an audience at UC Irvine that there was no way I could win, because I was “a woman running for attorney general, a woman who is a minority, a woman who is a minority who is anti–death penalty, a woman who is a minority who is anti–death penalty who is DA of wacky San Francisco.” Old stereotypes die hard. I was convinced that my perspective and experience made me the strongest candidate in the race, but I didn’t know if the voters would agree. The past few weeks, I’d done so much knocking on wood that my knuckles were bruised.
By 10 p.m., we were not much closer to knowing the outcome of the race. I was trailing, but we knew that a lot of precincts had yet to report. Ace suggested that I go out and address the crowd. “The cameras aren’t going to stay much longer,” he said, “so if you have a message for your supporters tonight, I think you should do that now.” It sounded like a smart idea to me.
I left the staff room, spent a few quiet minutes thinking about what I would say, then straightened my suit jacket and walked into the main room and onto the stage. I told the audience that it was going to be a long night, but that it was going to be a good night, too. My opponent was losing ground by the minute, I assured them. I reminded them what our campaign was about and what we stood for. “This campaign is so much bigger than me. It is so much bigger than any one person.”
At some point during my speech, I noticed a shift in the room. People seemed to be getting emotional. Back in the staff room, I later learned, two of my best friends, Chrisette and Vanessa, were sitting on the couch, sipping wine, listening to my speech. Chrisette turned to Vanessa:
“I don’t think she knows.”
“I don’t think she knows, either.”
“You gonna tell her?”
“Nope. You?”
“Nope.”
I was just finishing my remarks when I saw Debbie Mesloh, my longtime communications adviser, approaching. She mouthed to me, “Get off the stage and go to the back room, now.” That wasn’t reassuring. I finished my remarks and was making my way to Debbie when I was intercepted by a reporter and her cameraman.
“So what do you think happened?” she asked, putting the microphone in my face.
“I think we ran a really great race and it’s going to be a long night.” I said.
The reporter seemed confused, and so was I. The more questions she asked, the more it was clear we weren’t connecting at all. Clearly something had happened, and I was out of the loop. When I finally got back to the staff room, I learned what. While I’d been onstage, talking about what lay ahead, the San Francisco Chronicle had called the race for my opponent. No wonder people were crying! I’d been the only one out there who thought we were still in the game.
Realizing that our hometown paper had called the race against us felt like a punch in the gut. The mood was grim as my team and I huddled together in the greenroom. After so many months of working so hard, excitement was giving way to exhaustion. I looked around at the slumping shoulders and sad expressions. I couldn’t bear the thought of sending our volunteers home feeling this way.
Ace called me over. “Listen, I’m looking at the numbers, and a lot of our strongest areas haven’t come in. They called the race too early. We’re still in this.”
I knew he couldn’t see the future—but Ace wasn’t the kind of person who blew smoke. He knew California down to the precinct level, better than perhaps anyone in the state. If he thought we were still in it, I believed him. I told my supporters we weren’t giving up.
My opponent had a different view of things. Around 11 p.m., he stood up in front of the cameras and delivered a speech in Los Angeles declaring victory. But we waited. And waited—getting regular updates from the field and trying to keep one another’s spirits high.
Around 1 a.m., I leaned over to my childhood friend Derreck, who was like a cousin and who owned a chicken and waffle restaurant in Oakland. “Is your kitchen still open?”
“Don’t worry,” he promised. “I’ll take care of it.”
Sure enough, the next thing I knew, Delancey Street was filled with the mouthwatering aroma of fried chicken and corn bread and greens and candied yams. We all gathered around the aluminum pans and ate. About an hour later, with 89 percent of the precincts in, we were tied.
Finally, I turned to Maya. “I’m exhausted. Do you think anybody’s going to have a problem if I leave?”
“Everybody will be fine,” she assured me. “People are waiting for you to leave so they can, too.”
I went home and got maybe an hour or two of sleep, only to be jolted back awake by the sound of news helicopters circling in the sky. The Giants were celebrating their first World Series win in more than fifty years with a parade down Market Street. Most of the city was dressed in orange and black.
But the Giants’ victory wasn’t the only good news. More votes had come in, and I was now ahead in the race, albeit only by a few thousand votes. From the lowest of lows, now it felt like our campaign had vaulted to the peak of the mountain—on a day when music was rising from the streets and confetti raining down from the skies.
With two million votes still waiting to be tallied, there was a good chance we weren’t going to know the results for weeks. The counties had about a month to finish counting and certify their tallies.
My phone rang. It was John Keker, a storied lawyer in the Bay Area and a dear friend. He told me that he was assembling a team of top lawyers. “Kamala, we’re ready to convene to defend you if there’s a recount.” If there was going to be a recount, it wasn’t going to happen any time soon. The earliest that either of us could request one would be November 30.
In the meantime, members of my campaign staff, led by my campaign manager, Brian Brokaw, activated dozens of volunteers, who put off their vacation plans and got back to work. They fanned out across the state, in county after county, to monitor the vote counting in real time and report any irregularities. Days extended into weeks. Thanksgiving was fast approaching. And all the while, there was a roller coaster of results, making the whole thing pretty excruciating. It reminded me of my days trying cases, when a jury would go off to deliberate and there was nothing left to do but wait. We reconciled ourselves to the fact that nothing was likely to happen with the count over Thanksgiving weekend, so we sent everyone home to be with their families.
Early Wednesday morning, I headed for the airport to catch a flight to New York. I was going to spend the holiday with Maya, my brother-in-law, Tony, and my niece, Meena.
As we were pulling off the highway, I got a text from a district attorney who had supported my opponent. “I look forward to working with you,” it read.
I called my campaign team. “What’s going on? Have you heard anything?” I asked.
“We’re hearing he’s going to have a press conference. That’s all we know right now.” I was just pulling into the airport terminal. “We’ll check into it and get back to you.” I made it through security and onto the plane without hearing another word. I was in an aisle seat, and fellow passengers, in their Giants caps and jerseys, were walking past me asking, “Kamala, have you won yet? Do you know what’s going on?” All I could do was smile and say, “I don’t know. I don’t know.”
I took out my phone and realized that, going through the airport, I’d missed an incoming call. There was a voicemail from my opponent asking me to call him back. I dialed his number as the cabin doors were closing and the flight attendants were directing passengers to put their cell phones away.
“I want you to know I’ll be conceding,” he said.
“You ran a great race,” I said.
“I hope you know how big a job this is going to be,” he added.
“Have a nice Thanksgiving with your family,” I replied.
And that was it. Of the nearly nine million ballots cast statewide, I had won by the equivalent of three votes per precinct. I was so relieved, so excited, so ready to start. I wanted to call everyone, but the next thing I knew, we were barreling down the runway, and then we were in the air—with no Wi-Fi. My twenty-one-day election night was over, and all I could do was sit there. Alone with my thoughts. For five hours.
Because the count had taken so long, there was only a month to process the victory before my swearing-in. And beyond the election, I was also still processing the grief of my mother’s death. She’d passed away the year before, in February 2009, as the long, hard-fought campaign was just getting under way. I will say more about this in a chapter to come, but, needless to say, it was crushing to lose her. I knew what my election would have meant to her. How I wished she could be there to see it.
When January 3, 2011, arrived, I walked down the stairs of the California Museum for Women, History, and the Arts, in Sacramento, to greet the standing-room-only crowd. We had arranged for a wonderful inaugural ceremony, with Bishop T. Larry Kirkland Sr. giving the opening invocation and a gospel singer at the close. Flags were waving, dignitaries were there, observers peered down from the balcony. Maya held Mrs. Shelton’s Bible as I took the oath of office. But what I remember most vividly about the day was the worry I felt about saying my mother’s name in my address while keeping my composure. I’d practiced over and over again, and choked up every time. But it was important to me that her name be spoken in that room, because none of what I had achieved would have been possible without her.
“Today, with this oath,” I told the crowd, “we affirm the principle that every Californian matters.”
It was a principle that would be put to the test in the heady weeks that followed. Later that month, 37,000 homeowners lined up in Los Angeles to plead with banks to modify their mortgages so they could stay in their homes. In Florida, there were lines that quite literally stretched for days. “In the 1930s, we had bread lines,” said Scott Pelley on 60 Minutes, during a segment on the foreclosure crisis. “Venture out before dawn in America today and you’ll find mortgage lines.”
On my first day in office, I gathered my senior team and told them that we needed to get involved right away in the multistate investigation into the banks. I had appointed Michael Troncoso, a longtime member of my team, as chief counsel in the attorney general’s office, and Brian Nelson as special assistant attorney general. I asked them to dig in and get us up to speed.
Inside the office we were preparing for battle. Outside the office, we were constantly reminded of who we were fighting for. At every event we held, there was always a group of people—sometimes five or ten or twenty—who had come in the hope of seeing me and asking for my help, face-to-face. Most brought their paperwork with them—accordion folders and manila envelopes overflowing with mortgage documents and foreclosure notices and handwritten notes. Some had driven hundreds of miles to find me.
I’ll never forget the woman who interrupted a small health care event I was doing at Stanford. She stood up in the audience, tears streaming down her face, desperation in her voice. “I need help. You need to help me. I need you to help call the bank and tell them to let me stay in my home. Please, I’m begging you.” It was heartbreaking.
I also knew there were tens of thousands of people just like her, fighting for their lives, who didn’t have the ability to track down the attorney general in person. So we went directly to them, holding roundtable meetings in community centers across the state. I wanted them to see us. I also wanted my team to see them, so that when we were sitting across from the bank executives in a conference room, we’d remember who we were representing. At one of these convenings, I was speaking to a man about the problems he was having with the banks. His young son was playing quietly nearby. And then the little boy came over and looked up at his father.
“Daddy, what does ‘underwater’ mean?”
I could see the awful fear in his eyes. He thought his father was literally drowning.
It was a terrible thing to contemplate. But the metaphor was apt: a lot of people had gone under. Still more were clinging by their fingernails to the edge. And every day that went by, more and more of those desperate people were losing their grip.
Over the course of our battle with the banks, we’d heard so many stories that underscored that these issues weren’t intellectual or academic; they were about people’s lives. At one homeowners’ roundtable, a woman described with pride the home she had saved up to buy in 1997—the first home she’d ever purchased as an adult. After falling one month behind on a loan payment in early 2009, she’d called her lender asking for advice. Representatives for the lender said they could help, but after months of their insisting she produce and fax them endless paperwork, of sending her documents without explanation and demanding that she sign, of keeping her in the dark as she sought answers to her questions, her home was foreclosed upon from under her feet.
Fighting back tears as she shared her story with me, she said, “I’m sorry. I know it’s just a house . . .” But she knew, as we all do, that it’s never “just a house.”
My first opportunity to get personally involved in the multistate talks arrived in early March. The National Association of Attorneys General—whose acronym, NAAG, is appropriate—was holding its annual multiday meeting at the Fairmont hotel, in Washington, DC. I flew in with my team. All fifty attorneys general were there, seated in alphabetical order by state. I took my spot between Arkansas and Colorado.
As the conversation turned from general business to the multistate investigation, it suddenly became clear to me that the investigation wasn’t complete; there were still many unanswered questions. Yet they were talking settlement. They had a number on the table, and I got the impression that it was basically a done deal. All that seemed left to do was divide the money among the states—and that was exactly what was happening.
I was dumbfounded. What was the number based on? How did they come up with it? How could we negotiate a settlement when we hadn’t completed an investigation?
But what shocked me most wasn’t the choosing of an arbitrary dollar figure. It was that in exchange for settling, the banks were going to be given a wholesale release against any potential future claims—a blank check of immunity for whatever crimes they might have committed. That meant that by settling with them on the issue of robo-signing, we could be prohibited from bringing a future case against them that related to the mortgage-backed securities that had caused the crash.
During a break in the session, I gathered my team. The settlement was going to be on the agenda again in the afternoon.
“I’m not going to that meeting,” I told them. “This thing is baked.” I knew that if I joined the meeting, the conversation would just pick up where it had left off. They weren’t going to turn back just because a new AG expressed concerns. But if they knew I would pull out of the negotiations if I had to, that might move some minds. California had more foreclosures than any other state, making it the biggest exposure of liability for the banks. If the banks couldn’t get a settlement with me, they weren’t going to settle with anyone. It was one thing to know I had this leverage; it was another to convince the others I was willing to use it. If I skipped the afternoon session, my empty chair would express that message better than I ever could.
My staff and I left the Fairmont and took a cab to the Justice Department. We called Tom Perrelli on the way, to let him know we were coming. Perrelli was the U.S. associate attorney general. It was his job, among other things, to oversee the multistate investigation on behalf of the federal government. I told him that of the ten cities hit hardest by the foreclosure crisis at the time, seven were in California; that it was my job to get to the bottom of it; and that I couldn’t sign on to anything that was going to preclude me from doing my own investigation.
Perrelli made the case that my investigation wouldn’t yield what I hoped it would, that going after the big banks was not something any one state could do, even the biggest in the nation. And, he added, that kind of litigation was going to take many years. By the time I got what California deserved, the people who needed help would have already lost their homes. This was the reason there hadn’t been a thorough investigation; there simply wasn’t time.
Later that afternoon, I met with Elizabeth Warren, who at that time was working at the Treasury Department, building what would become the Consumer Financial Protection Bureau. I raised the same concerns with her, and she was sympathetic and supportive. As an administration official, she couldn’t outright tell us to go our own way, but I got the strong sense that she would understand if I persisted.
We flew home that night and got right to work. I had been told that, as things stood, California was going to get somewhere between $2 billion and $4 billion in the settlement. Some of the lawyers in the office thought it was a big number, big enough to take. My point to them was: Compared with what? If the banks’ illegal scheme had caused a lot more than $2 billion to $4 billion in damage, then those really big numbers would start to look really small.
The immediate challenge was that our office wasn’t equipped to answer that riddle. It was a problem that required economists and data scientists, not lawyers. Recognizing the hole in our game, I decided to hire some experts and put them to work crunching the numbers. I wanted to know how many underwater homeowners there were county by county so that we could target relief to the highest pain points. I also wanted to understand what we were dealing with in very human terms: How many people was the money going to help? How many would be left to fend for themselves? How many children were affected by the foreclosure crisis?
The results were as unacceptable as I had feared. Compared with the devastation, the banks were offering crumbs on the table, nowhere near enough to compensate for the damage they had caused.
“We need to be prepared to walk away from the settlement,” I told my team. “There’s no way I’m taking this offer.” I told them that it was time to open up our own independent investigation. “Look, we’re a guest at someone else’s party and we don’t have our own car,” I said. “We need our own ride so that when we’re ready to leave, we can leave.”
Even before taking office, I’d planned with my team to launch a statewide effort to investigate the fraud. Now was the time. That May, we announced the California Attorney General’s Mortgage Fraud Strike Force, a unit of the best and brightest lawyers from our consumer fraud, corporate fraud, and criminal divisions, as well as sworn investigators.
The robo-signing settlement was a critical part of the investigation, but our scope was even wider. I wanted to go after Fannie Mae and Freddie Mac, which owned 62 percent of new mortgages nationwide. I wanted to investigate the mortgage-backed securities that JPMorgan Chase had sold to the California public employee pension fund. And I wanted to go after the predators who had exploited these vulnerable communities, promising to save homeowners from foreclosure for a price—only to steal what little they had left.
The fact that we were doing our own investigation aggravated the multistate negotiators. The banks were furious that I was causing trouble. The settlement was now in doubt. But this had been my goal. Now, instead of merely noting my concerns, the state attorneys general and the banks would have to answer them, too.
Over the course of the summer, we focused on two tracks: the investigation on one, the settlement talks on the other. For my team, that meant working all hours of the day and night—traveling up and down the state and back and forth to Washington. Still, the negotiations were getting nowhere. The banks balked at our demands. At the same time, the rate of foreclosures picked up significantly in California.
In August, the New York attorney general pulled out of the multistate negotiations. In the aftermath, it seemed that everyone’s eyes had turned to me. Would I leave the negotiations, too?
I wasn’t yet ready to do that. I wanted to exhaust every reasonable possibility that the banks would meet our demands. There were important reforms that were part of the negotiation, and I wanted to see them implemented. We were being presented with a false choice: the reforms or the money. I wanted both.
And I knew that time was of the essence. In a homicide case, the body is cold; you’re talking about punishment and restitution after the fact. In this situation, the harm was still unfolding. While negotiations went on, hundreds of thousands of more homeowners had gotten foreclosure notices. It was happening every day and in real time. There were huge areas, entire zip codes, where people were hundreds of thousands of dollars underwater. My team and I pored over the numbers weekly—a dashboard of despair, describing how many people were thirty, sixty, ninety days from losing their homes.
Before I walked away from the table, I wanted to take one last shot at getting a fair deal and some real relief for my state.
To that point, the day-to-day negotiations had been led by Michael and a team of veterans of the California Department of Justice. The next meeting was being held in September, and the general counsels of the major banks had asked me to attend. I was sure they wanted me there so they could size me up from across the table—this new attorney general from out of nowhere. Good. I wanted to size them up, too.
We arrived at the offices of Debevoise & Plimpton, the Washington law firm that was hosting the meeting. We were led into a large conference room where more than a dozen people were gathered.
After a few polite hellos, we took our seats around a long, imposing conference table. I sat at one head of the table. The chief counsels of the big banks were there, along with a team of Wall Street’s best lawyers, including a man known as the “trauma surgeon of Wall Street.”
The meeting was tense from the moment it began. Bank of America’s counsel opened by turning to my negotiating team and complaining about the terrible pain we were putting the banks through. I’m not kidding. She said that the process was frustrating, that the bank had been through enormous trauma, that employees there were working to respond to all the investigations and regulatory changes since the crash. Everyone was exhausted, she told us. And she wanted answers from California. What was the holdup?
I ripped right in. “You want to talk about pain? Do you have any understanding of the pain that you’ve caused?” I felt it viscerally. It made me so angry to see homeowners’ suffering downplayed or dismissed. “There are a million children in California who aren’t going to be able to go to their school anymore because their parents lost their home. If you want to talk about pain, I’ll tell you about some pain.”
The bank representatives were calm but defensive. They essentially said the homeowners were to blame for getting into mortgages they couldn’t afford. I wasn’t having any of that. I kept thinking about what the home-buying process looks like in real life.
For the vast majority of families, buying a home is the biggest financial transaction they will ever be involved in. It’s one of the most affirming moments in a person’s adult life, a testament to all your hard work. You trust the people involved in the process. When the banker tells you that you qualify for a loan, you trust that she’s reviewed the numbers and won’t let you take on more than you can handle. When the offer is accepted, the broker is so happy for you, you’d think he’s going to move into the house with you. And when it comes time to finish the paperwork, it’s basically a signing ceremony. You might as well be popping champagne. Your broker is there, your banker is there, and you believe they have your best interests at heart. When they put a stack of paper in front of you, you trust them, and you sign. And sign. And sign. And sign.
I surveyed the roomful of lawyers, and I was certain that not one of them had read every word of their own mortgage documents before buying their first house. When I bought my apartment, I didn’t.
The bankers spoke about mortgages seemingly without any sense of what they represented to the people involved, or who those people were. To me, it sounded as though they had made terrible assumptions about the character and values of struggling homeowners. I’d met many of those people. And for them, buying a home was not just about an investment. It was about attainment, self-fulfillment. I thought about Mr. Shelton, who was always in the front yard, pruning his roses in the morning, always mowing or watering or fertilizing. At one point, I asked one of the lawyers, “Haven’t you ever known somebody who was proud of their lawn?”
The back and forth continued. They seemed to be under the misimpression that I could be bullied into submission. I wasn’t budging. Toward the end of the meeting, the general counsel of JPMorgan chimed in with what he apparently thought was a smart tactic. He told me that his parents were from California and that they had voted for me and liked me. And he knew there were a lot of voters back home who would be really happy with me if I just settled. It was great politics—he was sure of it.
I looked him straight in the eye: “Do I need to remind you this is a law enforcement action?” The room went quiet. After forty-five minutes, the conversation had gone on long enough.
“Look, your offer doesn’t come near acknowledging the damage you have caused,” I told them. “And you should know that I mean what I say. I’m going to investigate everything. Everything.”
The general counsel of Wells Fargo turned to me.
“Well, if you’re going to keep investigating, why should we settle with you?”
“You have to make that decision for yourself,” I told him.
As I left the meeting, I made the decision to pull out of the negotiations altogether.
I wrote a letter announcing my decision—but I waited to release it until Friday evening, after the markets had closed. I knew that my words could move markets, and that wasn’t my intention. This wasn’t about grandstanding or making a scene or tanking share prices. This was about trying to get justice for millions of people who needed and deserved help.
“Last week, I went to Washington, DC, in hopes of moving our discussions forward,” I wrote. “But it became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated. After much consideration, I have concluded that this is not the deal California homeowners have been waiting for.”
I started getting phone calls. From friends who were afraid that I had made too powerful an enemy. From political consultants who warned me to brace myself because the banks were going to spend tens of millions of dollars to throw me out of office. From the governor of California: “I hope you know what you’re doing.” From White House officials and cabinet secretaries, trying to bring me back to the talks. The pressure was intense—and constant—and it was coming from all sides: from longtime allies and longtime adversaries and everyone in between.
But there was another kind of pressure, too. Millions of homeowners had raised their voices, along with activists and advocacy organizations that were mobilizing based on our strategy. We knew we weren’t alone.
Still, this period was hard. Before bed, I would say a small prayer: “God, please help me do the right thing.” I’d pray that I was choosing the right path, and for the courage to stay the course. Most of all, I’d pray that the families counting on me remained safe and secure. I knew how much was at stake.
I often found myself thinking about my mother and what she would have done. I know she would have told me to hold fast to conviction; to listen to my gut. Tough decisions are tough precisely because the outcome isn’t clear. But your gut will tell you if you’re on the right track. And you’ll know what decision to make.
During those days, Beau Biden, Delaware’s attorney general, became an incredible friend and colleague. The banks were in Beau’s backyard, and the foreclosure crisis hadn’t hit Delaware as hard as it had other states. By some measures, he had every reason to keep his head down and toe the line. But that wasn’t who Beau was. Beau was a man of principle and courage.
From the very beginning, he had consistently objected to the deal. He hammered on the points that I was making, too: not enough money; no investigation into the scope of the fraud. Like me, he wanted testimony and documents. He wanted proof that the banks even owned the mortgages they were foreclosing on. And he never budged from that position. He had also opened up his own investigation, and we were actively sharing the information we uncovered. There were periods, when I was taking heat, when Beau and I talked every day, sometimes multiple times a day. We had each other’s backs.
I had other great allies in the fight, too. Martha Coakley, then the attorney general of Massachusetts, was tough and smart and meticulous in her work. My now–Senate colleague Catherine Cortez-Masto was Nevada’s attorney general at the time, and she became a formidable ally as well. Nevada, like California, had been pummeled by the crisis, and Catherine, who’d been in office since 2007, had formed her own Mortgage Fraud Strike Force in 2008. She, like me, was determined to fight the banks, and in December 2011 she and I joined forces to probe foreclosure fraud and misconduct. I could not have asked for better or more resolute teammates.
At the height of this period, I was constantly traveling the country with my team. I’ll never forget the time we flew out to Washington, DC, dressed for the winter, only to find out that we would need to go to Florida the following day. Brian and I ended up racing into a clothing store in Georgetown to find more weather-appropriate attire. It was an awkward moment of levity as we critiqued each other’s choices off the rack.
By January, the banks were exasperated. Michael came into my office.
“I just got off the phone with the general counsel of JPMorgan,” he said. “I told him what the deal was—that we weren’t budging off our position.”
“What did he say?” I asked.
“He wouldn’t stop screaming at me. He says it’s over. That we pushed too far. It was really intense. And then he hung up.”
I pulled my team into my office and we tried to figure out a next step—if there was one to be taken. Had we killed the possibility of any deal? Was there still a chance? I needed to be sure. We sat in silence for a while, thinking it through, until an idea popped into my head. I shouted for my assistant next door (which was the same intercom system we had used growing up). “Get me Jamie Dimon on the phone.” Dimon was and—as of this writing—remains the chairman and CEO of JPMorgan Chase.
My team freaked out. “You can’t call him. He’s represented by an attorney!”
“I don’t care. Get him on the phone.”
I was tired of feeling caged, of talking through lawyers and other intermediaries in endless obfuscation. I wanted to go right to the source, and I believed the situation demanded it.
About ten seconds later, my assistant popped her head into my office. “Mr. Dimon is on the line.” I took off my earrings (the Oakland in me) and picked up the receiver.
“You’re trying to steal from my shareholders!” he yelled, almost as soon as he heard my voice. I gave it right back. “Your shareholders? Your shareholders? My shareholders are the homeowners of California! You come and see them. Talk to them about who got robbed.” It stayed at that level for a while. We were like dogs in a fight. A member of my senior team later recalled thinking, “This was either a really good or a colossally bad idea.”
I shared with Dimon the way his lawyers were presenting his position, and why it was unacceptable to me. As temperatures cooled, I got into the details of my demands so that he would understand exactly what I needed—not through the filter of his general counsel, but directly from me. At the end of the conversation, he said he would talk to his board and see what they could do.
I’ll never know what happened on Dimon’s side. But I do know that two weeks later, the banks gave in. When all was said and done, instead of the $2 billion to $4 billion that was originally on the table, we secured an $18 billion deal, which ultimately grew to $20 billion in relief to homeowners. It was a tremendous victory for the people of California.
As part of the settlement, the federal government was going to assign a monitor to make sure the banks complied. But given how much exposure California had, that didn’t satisfy me. I was going to hire our own monitor and authorize her to oversee the agreement’s implementation in our state.
I had been asked to fly to Washington to be part of the larger announcement, a major press conference and celebration that would take place at the Department of Justice and the White House. But I wanted to be at home with my team. It was our victory to share together. And we needed to gear up for the next battle ahead.
The settlement was just the beginning. In addition to money, the agreement required banks to provide homeowners with a number of reforms to make the process of fighting a foreclosure easier. But the settlement required those measures to be in place for only three years. If we wanted to protect homeowners in California from abuses in the future, we were going to need legislation to make the terms of the settlement permanent. I wanted the banks to be permanently prohibited from engaging in their notoriously predatory practices. And I wanted individual homeowners to have the right to sue when banks broke the rules. In coordination with our allies in the legislature, we put these ideas together into what we named the California Homeowner Bill of Rights.
But getting a new law that related to the banks passed through the legislature was going to be a problem. The banks had enormous influence in Sacramento. California legislators had tried to pass similar legislation on at least two prior occasions, only to be defeated by bank resistance. This was going to have to be a full-court press.
The reception to the bill was cold at first. People told me it was dead on arrival. They said the banking lobby was too strong to overcome. The rightness of the legislation seemed to have little to do with the calculation.
I met with John Pérez, who was speaker of the state assembly at the time, to come up with a strategy to turn the bill into law. John is an exceptional man, savvy in both policy and politics. He and I were in complete agreement about the importance of a Homeowner Bill of Rights, and he was ready to work to leverage his power to take on the banks.
I remember at one point during this effort, Speaker Pérez invited me to the Democratic policy retreat of the state assembly at the Leland Stanford Mansion, in Sacramento. Pérez, who had made sure to be in charge of seating assignments, strategically placed me at a table with a couple of strong allies, as well as a few legislators who needed some persuading. We spent much of the dinner talking about the bill. By that point, I knew more than I ever imagined I would about how the banks had acted, all the ways in which they had victimized homeowners. Being able to talk through those experiences with the group seemed to help. When the dinner was over, I had the sense that I had changed one or two of their minds.
None of the legislators ever explicitly said they were siding with the banks. But in conversation after conversation, they would try to find any technical excuse they could for why they couldn’t support the bill. If only you’d done this. If only you’d done that. If only that semicolon wasn’t there.
I’ll never forget one Democratic legislator saying to me, “Well, Kamala, I don’t know what’s so bad about these foreclosures. They’re good for our local economy. Because when a house is foreclosed upon and abandoned, that means they have to hire painters and gardeners to clean it up.” Really? Really? Did this guy also support arson because it keeps fire extinguisher companies in business? It was stunning to me how people would justify being in the pocket of the banks.
While Speaker Pérez spent time focusing on the inside game, I went on the road, using the bully pulpit to evangelize for a fairer, more just system for homeowners. I was joined in the effort by a number of groups that had been championing homeowner rights and were mounting a pressure campaign to get the bill passed. Organized labor was critically important to this effort. Their ability to mobilize supporters was stunning. So many people called their legislators that they crashed the phone lines.
But it wasn’t just labor’s organizing efforts that mattered. It was their very presence. There was a cynical way of thinking in Sacramento: When a home is foreclosed on, the family living there is likely to move out of your district. They will no longer be your constituents. So their anger is only a temporary problem for you. The banks, on the other hand, are a permanent presence in the state capital, and their anger could result in retribution. What organized labor made clear was that there was also a permanent presence in the capital that was going to fight intensely for workers, not just so they could have better wages, but so they could be treated with dignity in every aspect of their lives, including buying a home. It sent a powerful message: Side with the banks, answer to labor.
As the vote drew near, I started walking the halls of the capitol building, knocking unannounced on legislators’ doors. A lot of people refused to see me. I dispatched key members of my team as well. Brian Nelson, my special assistant attorney general, recalls that I would sometimes call him at his desk, and if he answered, he was in trouble. “Why are you sitting at your desk?” I’d ask. “Why aren’t you walking the halls of the capitol? I know you have important work, but nothing is more important than this. You gotta be walking the halls! No one should be able to avoid having a face-to-face conversation with one of us.”
When the bill came to the floor for a vote, we still didn’t have a majority. Many legislators were planning not to vote so they wouldn’t have to take a position one way or the other. But we needed forty-one people to vote yes. Abstentions were tantamount to voting no.
Speaker Pérez had a plan. He was going to hold the vote open while we continued to pressure people to come to our side. If they didn’t want to vote, he implied, the vote was just going to stay open forever. At the beginning of the proceeding, he had an ally make a point of parliamentary inquiry.
“What’s the longest the roll has ever been open?” the legislator asked.
“To my understanding,” Pérez said, “the longest the roll has ever been open was an hour and forty-five minutes, and you know how competitive I am. I’m willing to go a lot longer than that!” At that point, everyone understood he was serious, and green lights started flashing as votes were cast.
I was in the office of Darrell Steinberg, the senate president pro tem, who had also played an instrumental role, watching the floor action on a closed-circuit television. I watched for legislators who weren’t yet on the floor or who were milling around in the back. “I saw you didn’t vote,” I would text. “Go vote. It’s time.” We moved person to person, one by one, as John repeated the same phrase over and over again. “Have all members voted who decided to vote? Have all members voted who decided to vote?” He sounded like an auctioneer.
It felt like it lasted forever. But in reality it took only about five minutes of this before we got our forty-first vote cast. John closed the vote, and we declared victory. The bill passed the state senate as well and was signed into law by the governor. We had done what we had been told was impossible. It was as gratifying a moment as I can remember, and a reminder that even in the sausage making of politics, inspiring things can happen and good work can be done.
Meanwhile, the Mortgage Fraud Strike Force was pushing hard. The unit would go on to investigate and prosecute a number of major mortgage scams. The head of one of the larger scams was sentenced to twenty-four years in state prison. Because of the efforts of a truly extraordinary team, we were able to secure—on top of the $18 billion—$300 million from JPMorgan to reimburse the state pension system for losses on investments in mortgage-backed securities. We also secured $550 million from SunTrust Mortgage, $200 million from Citigroup, and another $500 million from Bank of America—all in connection with the mortgage crisis.
These were important wins, to be sure. But they weren’t the kinds of victories we wanted to celebrate, because, for all the people these actions helped, millions of Americans across the country were still hurting. And despite the billions we recovered, a lot of people still lost their homes. The structural damage to the economy was so profound that, even with some relief, many people couldn’t pay their mortgages and still make ends meet. The jobs weren’t there. And neither were the wages.
Countless Americans saw their credit destroyed. Parents’ dreams of financing their children’s education evaporated like mist. Families faced multiple stresses simultaneously—from joblessness to homelessness to abruptly having to switch school districts. One analysis published in The Lancet suggested that “the rise in US unemployment during the recession [was] associated with a 3.8% increase in the suicide rate, corresponding to about 1330 suicides.”
In many ways, the impact of the crash is still with us in 2018. In Fresno, the overwhelming majority of homes are still valued below their prerecession levels. Nationally, middle-class wealth was nearly wiped out and much of it hasn’t returned.
Studies suggest that the burden hit black families disproportionately. An independent report of the Social Science Research Council, commissioned by the American Civil Liberties Union, found that, whereas white and black families alike were hit hard by the 2007–2009 crisis, by 2011 “the typical white family’s losses slowed to zero, while the typical black family lost an additional 13 percent of its wealth.” The consequence: “For a typical Black family, median wealth in 2031 will be almost $98,000 lower than it would have been without the Great Recession.”
In other words, tomorrow’s generations will suffer as a result of yesterday’s folly and greed. We cannot change what has already happened. But we can make sure it never happens again.
The culture on Wall Street hasn’t changed. Only some of the rules have. And the banks are waging a full-scale battle to repeal the Obama-era Wall Street reforms that have helped hold them in check. Where they have failed to repeal them, they have done everything they can to get around them. According to an analysis from The Wall Street Journal, between 2010 and 2017, major banks invested $345 billion in subprime loans—funneling the money to nonbank financial institutions, or so-called shadow banks.
“Banks say their new approach of lending to nonbank lenders is safer than dealing directly with consumers with bad credit and companies with shaky balance sheets,” noted the Journal. “Yet these relationships mean that banks are still deeply intertwined with the riskier loans they say they swore off after the financial crisis.”
Meanwhile, in 2017, the president appointed a man to run the Consumer Financial Protection Bureau who has referred to that very bureau as “a joke,” and who set about actively dismantling it from the inside. In 2018, instead of tightening the rules on Wall Street, Congress rolled back essential protections, releasing midsize banks from the regulations meant to keep them in check. This is more than unacceptable. It’s outrageous.
There is still much to be done. If we agree that we are tired of banks getting away with such reckless behavior, if we agree that we can’t let the banks drag us into another recession, if we agree that homeowners deserve to be treated with dignity and respect, not as lines on a balance sheet to be packaged and sold, then there’s only one way to achieve the change we seek: with our voices and our votes.