Ted Simons: Good evening and welcome to "Arizona Horizon," I'm Ted Simons. Arizona was awarded $97 million as the as the result of a national settlement with lenders who were sued for mortgage fraud. The new state budget signed by Governor Brewer puts half of that money into the state's general fund. Critics say that's a misuse of the funds that were supposed to help victims of mortgage fraud. Here to share his views on the matter is Arizona Attorney General Tom Horne who signed the settlement on behalf of Arizona and whose office controls the state's share of the money. Welcome, good to have you here.
Tom Horne: Good to see you, Ted.
Ted Simons: The $50 million that went to the legislature, the Governor and the state, why did you allow this to happen?
Tom Horne: Well, as you know I argued hard against it. I thought all the money should be used to help keep people in their homes. The amount of money that came to Arizona in the settlement -- and by the way, Arizona bargained really hard. The national settlement was announced at 8:00 a.m. Thursday morning, we negotiated until the night before. This is really about 5% of the total amount, not 50%. But still, I thought all the money should be used to help keep people in their homes and I argued hard not to do it and negotiated hard not to do it. But when the Governor and legislature are in agreement about something pertaining to the budget, the people control their budget through their elected governor and legislature. Those are the institutions empowered under our (state) constitution to deal with the budget, not the attorney general. Since they were in agreement on it, I had to give way.
Ted Simons: We want to be clear now. The 50% was of the $100 million allocated for use for a variety of things, which critics say is for foreclosure prevention, for legal services, for mitigating fraud activities, all these sorts of things. Did you advise, by the way, the Governor and legislature against this move?
Tom Horne: I not only advised against it, I argued hard against it and we negotiated the amount. I have a list of states where the legislature took 100% or close to 100%. Connecticut, Georgia, Kansas, Texas, Utah, Vermont, Wisconsin, the District of Columnia, these and other states they took all of it or virtually all of it. They took half of the cash I administer as attorney general. I'd say it's 5% of the money allocated to keep people in their homes.
Ted Simons: Most of that money deals with those five major banks. This is money that could be used to cover -- and we had the Arizona Housing Association on, and they were talking about how important it is for this kind of money, this much money, to be used for folks not covered by those five major lenders, the Fannies and Freddies of the world. They need the money and deserve it because the money was designed to help them.
Tom Horne: I argued just that. One of our problems has been with public officials who don't understand the limitations of the powers that they have. The attorney general is not the person who controls the budget. The legislature and the governor are the two institutions that control the budget. If they are in agreement, there's not much room to fight, although I argued hard and we negotiated hard. Once a decision was made it becomes my job then to defend it as the attorney general.
Ted Simons: So when critics say it was a court-ordered trust fund and it "shall be used for foreclosure prevention and mitigation," that sounds pretty clear that it's supposed to be used for that, not to be swept by anyone.
Tom Horne: What the governor and legislature relied on was the language in the consent judgment that says that the money can be used to compensate the state for costs resulting from the alleged unlawful conduct of the defendants. And their argument is that we had a 30% drop in state revenues from taxes because of the recession brought on by the mortgage crisis and that's many billions of dollars. $50 million is a small part of that.
Ted Simons: The Arizona Housing Association said the only real numbers they get out the state regarding income tax revenue is income tax revenue, which actually increased because so few people could take off their mortgage interest deduction.
Tom Horne: There's no doubt that the state revenues from taxes declined by 30%. And we've had a budget anywhere between eight and $10 billion. You're talking about many billions of lost tax revenues. I think the housing authority is mistaken by talking about an increase in tax revenues. We just went through a terrible experience with education and a lot of other things because of a 30% drop in revenues.
Ted Simons: They are talking about a direct consequence of foreclosure fraud.
Tom Horne: It doesn't say that it -- it says compensate the state for the alleged unlawful acts of the defendants. $50 million is a tiny percentage of the losses that the state actually experienced.
Ted Simons: The suit was brought by consumer divisions, correct, your consumer divisions?
Tom Horne: Yes.
Ted Simons: If it's brought by the consumer division, should not that money go directly -- I'm preaching a little bit to a small choir here, but should that not go to affected consumers?
Tom Horne: You're preaching to someone who's saying, I mean, I argued that. I didn't think it should go just into the general fund. But as I say, that wasn't my decision to make. That was a budgetary decision to be made by the governor and the legislature. I gave my advice and arguments and negotiated on it. The Governor and the legislature are together. If there's daylight between them there's room to maneuver. If they are together, there's not much room to maneuver on an issue reflecting the budget. That's our constitution, our system. And so I have to give way to that. As I say, I will defend it as attorney general, but we negotiated for as much as I could. I listed a rather long list of states where they got 100% of it. Some folks are wondering, why can't you do something right now.
Tom Horne: Between my position and their position there was the Grand Canyon.
Ted Simons: Why aren't you fighting harder to get this money back?
Tom Horne: I was fighting at the time, they still have a decision to make on the policy issues. Once they make a decision, then I'm the attorney general. I'm the lawyer for the State. My role switches and then I have to defend the State.
Ted Simons: So the idea of outside interests filing suit, where do you stand on that?
Tom Horne: If they file suit I'll defend it.
Ted Simons: You will defend it? Even though you disagree in principle with what happened?
Tom Horne: At this stage it doesn't matter what my policy views are. I will defend any lawsuits that are brought.
Ted Simons: Could you recuse yourself, considering you advised them against taking this?
Tom Horne: This isn't a direct conflict of interest, this is a matter of I disagreed about the policy. Legislature and governor made their decision. It's now my job as the attorney general to defend the state and I will do my job.
Ted Simons: The bottom line is you agree with those who say this money should be going to folks, consumers affected by the foreclosure crisis, the lending crisis.
Tom Horne: As policy matter that was what I argued.
Ted Simons: All right. Good to have you here.
Tom Horne: Thank you.