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Congress / ANALYSIS

Martha Coakley's Comeback

Democratic candidate for the U.S. Senate seat, Martha Coakley, bows her head in defeat at the Sheraton in Boston, Massachusetts on January 19, 2010. Coakley is running against Repubulican State Senator Scott Brown in a special election to fill the U.S. Senate seat left empty by the death of Sen. Edward M. Kennedy, D-Mass. (UPI/Ryan T. Conaty)

photo of Michael Hirsh
February 9, 2012

In January 2010, Martha Coakley's gaffe-filled loss to Scott Brown in the Massachusetts special election to replace Ted Kennedy marked one of the most humiliating moments for Democrats in the Obama era. Her defeat presaged the GOP takeover of the House later that year and the stranglehold that tea party politics has had on national policymaking in the last two years.

But Coakley's looking pretty good since then, making me wonder: has she been more effective from Massachusetts than she would have been from Washington? Even as all the attention has been focused on  Elizabeth Warren, the consumer-finance firebrand who is in a tight Senate race with Brown, Coakley has quietly built up an impressive record as attorney general in Massachusetts.

During the course of a long negotiation that ended today, Coakley had been one of the few holdouts to resist a deal desperately sought by the major banks over documentation fraud and other past abuses. More than 40 states have agreed to the $26 billion settlement, which was announced today, but Coakley had been heeding consumer-finance advocates who say the deal is a cave-in, and she has insisted on her right to sue.  Indeed, Coakley has launched what is considered the most comprehensive lawsuit in the nation over unfair and deceptive business practices. The Boston Globe recently called her "a national leader on behalf of homeowners caught up in the long-running housing crisis."

 

Under the legal theory being used by Coakley, the big Wall Street banks can and should be held accountable for the nonbanks that have been central figures in documentation fraud. According to Kathleen Engel of Suffolk University Law School, the documentation scandal that has cropped up in the last year or so--raising doubts about whether investment trusts ever obtained proper ownership of many of the loans and whether they can foreclose on mortgages--can be used to pin liability on these "vertically integrated" Wall Street giants and cost them some serious money in fines.

"The environment is ripe for consumers, state attorneys general, and federal agencies to pursue claims against entities further up the securitization food chain, especially given increasing evidence that Wall Street failed to observe the formalities that might have insulated arrangers and investors from most consumer claims," Engel and a co-author,  Thomas Fitzpatrick, an economist at the Federal Reserve Bank of Cleveland, write in a forthcoming article in the Harvard Business Law Review.

Then, on Wednesday, Coakley made an appearance at the Center for American Progress in Washington arguing for the success and constitutionality of Massachusetts' health care law--which she has been responsible for implementing and which, as it looks better and better as a program, is going to prove more and more embarrassing for Mitt Romney. The leading GOP candidate has distanced himself from it under withering GOP criticism of Obamacare, which was modeled on it. But the program appears to be working: according to a statewide survey taken in 2010, 94.2 percent of Massachusetts' nonelderly (19-64) residents reported being covered, a significant increase over the 86.6 percent estimate of 2006. The survey also showed first-time reductions in emergency department visits and hospital inpatient stays as well as improvements in self-reported health status Even right-wing wraith Ann Coulter argued last week that the law works, though she made the argument that if applied federally it would be unconstitutional, backing up the Court of Appeals for the Eleventh Circuit, which declared that the individual mandate in the Affordable Care Act unconstitutional. Coakley argued vigorously against that on Wednesday.

Last week, Coakley also outpaced the Obama administration in pressuring the acting director of the Federal Housing Finance Agency, Ed DeMarco--who oversees Fannie Mae and Freddie Mac--to reduce loan principal payments for underwater mortgage holders and do more to prevent "unnecessary foreclosures."

For all her failings as a Senate candidate, Coakley is looking pretty effective as a state attorney general. I wonder if we will see her on the national scene again at some point ...

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