The Battle That Changed Kamala Harris

What the national mortgage settlement taught the freshly elected California attorney general—and how it connected her to Joe Biden

Then–California Attorney General Kamala Harris and then–Nevada Attorney General Catherine Cortez Masto in 2011 (Luis Sinco / Los Angeles Times / Getty)

Calls from the White House come in with the number blocked. People who are used to getting them know to pick up. And invitations to sit in the first lady’s box for the State of the Union address don’t come around very often. People who get them know to say yes.

Kamala Harris received one of those invitations at the end of January 2012. She was in Washington, D.C., for meetings at the Justice Department about a multibillion-dollar settlement among states, the federal government, and American banks over the predatory mortgages that had helped sink the economy. The banks wanted to pay as little as possible, and then be released from any future claims. President Barack Obama’s administration wanted to get results—and move on. Harris, who was one year into her job as California’s attorney general, had broken with most of the rest of the state attorneys general, hoping to get more money for California.

Harris declined the invitation. She wasn’t done negotiating. She didn’t want to give the wrong impression.

When Harris and I spoke about the mortgage settlement a few days before Joe Biden named her as his running mate, she wasn’t happy that I had heard the story about the State of the Union. She’s always wary of being seen as at odds with Obama. But the year Harris spent negotiating the mortgage settlement—fighting with the banks, the administration, and even her fellow attorneys generals—was transformative for her. During the mortgage fight of 2011 and early 2012, she was in a big new job, figuring out how to leverage her power. The experience was also, she told me, weirdly relevant to the position she’s in now, with a COVID-induced foreclosure-and-eviction crisis looming. This moment is “actually similar in many ways,” Harris told me.

The mortgage fight was personal to her: She still remembers the day, when she was in high school, when her mother bought their first house, and the pride and stability and vision of their family’s future that came with it. “The thing that I think that experience reinforced, that people like Dr. King knew … the ability of all people to be able to buy a home is—it is one of the essential elements of a healthy community,” she said.

Her political future was at stake, too. She was trying to define what she calls her practical approach to progressive politics in the face of critics who believe this is code for giving in to moderates and corporate power. Older, more established Democrats were dismissive of her, and accused her of thinking only about how the settlement could help her politically. She was in a difficult spot: If she got too little, she risked angering California homeowners and the left wing of her party, which was deeply suspicious of any accommodation with the banks. But if she pushed too hard or held out too long, she’d make permanent enemies in the administration (which wanted a deal) and in the still-powerful financial sector—all as loan defaults kept piling up. She stayed up late many nights, wondering whether she was messing up. She was fighting an administration that she respected.

New York Attorney General Eric Schneiderman, who had once been Harris’s ally in the negotiations, sat in the box with Michelle Obama that night, smiling. He was going to head a new mortgage-crisis unit for the administration. Harris was alone in her hotel room, on a conference call with her staff, with the speech on the TV in the background.

If she had accepted the State of the Union invitation, Harris might not have been in the position to accept the Democratic Party’s vice-presidential nomination last night. Breaking away from the administration and most of her fellow attorneys general wasn’t easy. But in that fight against the Obama administration, Harris found an unexpected ally and confidant: the Delaware attorney general, then–Vice President Joe Biden’s beloved son Beau.

“I knew Joe as vice president. I knew Joe on the campaign trail,” Harris said as she accepted the nomination, her voice catching in the nearly empty room where she was delivering the speech. “But I first got to know Joe as the father of my friend.”

Harris was elected California attorney general in November 2010, while the Obama administration was trying to drag the country out of a financial crisis that risked becoming a depression. Since Obama had taken office two years earlier, top officials at the Federal Reserve, Congress, the Treasury Department, and the White House had been debating how to respond to different elements of the economic collapse. A central argument was over how to deal with the foreclosure crisis that had forced millions of Americans out of their homes. The argument boiled down to whom to blame: Should the banks be punished for taking advantage of people who didn’t know any better, or should Americans pay the price for taking out loans they couldn’t afford?

Trying to head off a patchwork of individual lawsuits, Shaun Donovan, then Obama’s secretary of housing and urban development, proposed a settlement to force the big banks to compensate consumers. Some of the president’s top economic advisers were skeptical. All 50 state attorneys general and some 13 federal agencies were going to sign off on a single agreement? Good luck with that.

Over meetings that included lunches with Elizabeth Warren—then helping Obama set up the Consumer Financial Protection Bureau—Donovan sketched out a plan. He would be the point person for the administration, bringing coalitions of Republican and Democratic attorneys general together with the banks. They would try to come to a consensus that would satisfy future Trump appointees like Scott Pruitt, then the attorney general of Oklahoma (and ultimately the only AG who didn’t join the final settlement), and Virginia’s Ken Cuccinelli, but also Obama and a collection of Democratic AGs who saw some of their newer colleagues as just chasing their own ambitions.

Harris had spent her career to that point as a criminal prosecutor, and had a prosecutor’s instincts: If there was wrongdoing, send someone to prison. But this was a civil settlement, and she didn’t know much about mortgages, or about suing banks. She remembers being told at one point that if she put off making a deal until a certain date, 40,000 people would lose their homes. How was she supposed to weigh that against getting a result that would make sense for California, a state of 40 million where, by the end of 2011, 700,000 homes were either in or near foreclosure, and where homeowners were already souring on a smaller 2008 mortgage settlement with Countrywide negotiated by her predecessor, Jerry Brown.

At first, Schneiderman, who had also been first elected in 2010 and had a powerful New York law called the Martin Act to use, led resistance to the settlement. Inside the Justice Department and among the other AGs, Harris was immediately seen as a more constructive negotiator—while Schneiderman was seen as a headline chaser, multiple former administration officials told me. Though this was years before allegations that Schneiderman abused women forced his resignation, two people close to Harris remember her mentioning at the time that, as Schneiderman was talking to her about how they were going to make headlines for taking on the banks, she got the sense that he was trying to hit on her. (The people who spoke to me about Schneiderman requested anonymity to candidly discuss sensitive interactions; my attempts to reach him for comment were unsuccessful.)

For her first nine months in office, Harris worked with the main group of attorneys general negotiating the settlement. The banks’ initial offer included some $2 billion for California. Harris became suspicious that the banks were trying to bamboozle her, so she hired an outside consulting firm to conduct its own analysis of how the offer matched up to the damage done. True, $2 billion seemed like a lot of money. But the outside firm found that it amounted to just a few thousand dollars in relief for each distressed homeowner—at a time when the average distressed homeowner was $93,000 underwater. “One of the things I always say is ‘Show me the math,’” Harris told me. “Sometimes that means ‘Show me the logic.’ But in this case, it actually meant ‘Show me the numbers.’”

Armed with that information, Harris flew to a crucial September 2011 meeting in Washington. “If we had done anything wrong, we would have been sued already,” a lawyer for one of the banks said that day, according to a Harris aide who asked not to be named in order to discuss closed negotiations. “This has been very painful for the bank and our employees; they’ve really worked so hard to answer your questions,” another lawyer said. Harris wasn’t convinced; in fact, the lawyers’ comments persuaded her to press harder. The meeting did not end well. The banks weren’t budging, and Harris and her team believed some banks were accelerating foreclosures to pressure them to make a deal. Harris felt abandoned by the Obama administration, which was eager to have a win for the president’s reelection campaign. And she felt shunned by the AGs leading the effort, who were annoyed that she was holding out.

After the meeting ended, Harris and an aide caught a cab. “If we don’t take the deal, how many people are going to lose their homes?” Harris asked as they strategized their next moves. She stared out the window. It was raining that afternoon. She could see the Capitol ahead. She stopped herself. “Wait a minute,” she said. “They’re all going to lose their homes anyway.”

In her private office in Los Angeles a few days later, Harris asked her senior staff to debate the issue. She went over the banks’ offer. She asked how much information her team could reasonably expect to get by subpoena. She wanted to know what kind of resources going alone would take, and whether it would consume the whole office.

Wary of setting off a tailspin in stock prices, Harris waited until the markets closed the next Friday afternoon, September 30, 2011, to release a letter she’d written to the Justice Department and Tom Miller, the Iowa attorney general and head of the Democratic negotiators, informing them that she was walking away from the proposed deal. First she called around to give other California leaders a heads-up. The general response, an aide recalled, was “I hope you know what you’re doing.”

Katie Porter, now a freshman member of the House of Representatives from California but then a law professor specializing in banking law and keeping close tabs on the negotiations, told me she still hands Harris’s letter out to her staff, quoting the line “California is hurting.”

The White House, though, was angry. An October 2011 internal memo from Harris’s office advised her, “in anticipation of further calls from senior Obama administration officials,” to claim credit for changes that were being made to the banks’ offer. (Others involved in the negotiations told me this somewhat overstated how much Harris’s walkout had changed the deal and understated how much was being done by the Justice Department and other attorneys general.) On November 7, Harris spoke with Donovan, prepared to tell him that she felt like she was being asked to just trust the banks to do the right thing. “I am told that this uncertainty is built into this deal and animates the banks’ willingness to do it because it allows them to administer its performance in the manner they deem most beneficial to them,” she was planning to say, according to talking points I obtained. “I can’t accept that.”

Donovan told me that he felt Schneiderman’s eagerness to stir up media attention for how he was taking on the administration displeased everyone, and helps explain the sense of antagonism between Harris and the Obama administration at the time.

“I was trying to do the same thing at the national level that she was at the state level—with doubters and colleagues who thought I was asking for too much. What I felt with her was more kinship than that we were on different sides of the table,” Donovan said. “I respected her for what she was doing and hoped she got what she wanted, but at the same time, understood that she was potentially risking the larger deal.”

Harris had a few allies among the other attorneys general. They included Martha Coakley in Massachusetts, fresh off her Senate loss to Scott Brown; Lisa Madigan in Illinois; and Catherine Cortez Masto in Nevada.

Her relationship with Beau Biden was different.

“He stood with us. And he did not have to,” Harris told me. “He meant it, that this was wrong: ‘I’m standing with you guys.’ Beau was not about gestures. It was literally—he meant it; he was there. He was in the foxhole.”

As the attorney general of Delaware, the vice president’s older son had some power over the banks because of how they availed themselves of state laws to incorporate there. But he had relatively few foreclosures in his state, and no clear political advantage to getting involved. On the contrary, given who his father was, he knew that he would likely just draw damaging attention to both of them.

When I spoke with Harris, Biden hadn’t made up his mind yet about a running mate, but she knew her chances were good. And she had known I was going to ask about Beau. Still, the question stopped her, and she paused the interview for a moment. This had been a real friendship—long meetings and phone calls that slowly became what aides described as sibling-like admiration and ribbing. She wept when she heard he had died, and flew across the country alone to attend his funeral. But to talk about this in the context of Biden’s running-mate selection process felt “opportunistic,” she said, and she didn’t want to do that with Beau’s memory.

Harris and Beau had a shared discomfort with going against the Obama administration. Harris had met Obama in Chicago during his Senate run; had flown to Springfield, Illinois, to stand in the freezing cold at his presidential-campaign kickoff; had knocked on doors for him in Iowa in 2007—she didn’t want to be on the other side of the table from him. The president’s aides weren’t being very subtle about their displeasure; one top political adviser called her at one point and said, essentially, “You’re going against us. We’ll remember this.” Harris’s brother-in-law, Tony West, was high up in the Justice Department. For her to ditch the negotiations would mean literally going up against family. She discussed this with Beau. They talked about trying to outshine parents who had helped define them—her mother, his father. The two were close in age, thinking about their generation of political leadership, and they talked about that too. Sometimes they spoke multiple times a day.

“When you are under that kind of pressure, it really does shed whatever kind of veneer, because you just have to be real and you see how people handle pressure. It reveals a lot, I think, about one’s character, or one’s nature,” Harris told me.

At National Association of Attorneys General meetings and other events, Harris and Beau would ride around in each other’s cars together to get a few more minutes in private. “Kamala felt she could always trust him—they could freely cooperate,” recalled Brian Nelson, a special assistant attorney general under Harris and one of her main deputies on the mortgage negotiations. At one meeting in Florida, the other AGs aligned against the settlement gave Beau an honorary set of high heels—he was the only man in the group. “Beau took that moment and talked about the leadership of the women and their strength—the best gift he’d ever gotten in his life,” Nelson told me.

Harris’s team kept pushing. The banks kept pushing back. The Obama White House kept pushing them together.

In her book The Truths We Hold, Harris traces the turning point to a tense January 2012 phone call with JPMorgan Chase CEO Jamie Dimon. “I took off my earrings (the Oakland in me) and picked up the receiver. ‘You’re trying to steal from my shareholders!’ he yelled. I gave it right back. ‘Your shareholders? Your shareholders? My shareholders are the homeowners of California!’” Harris aides remember a less airbrushed, rougher version than what made it into her campaign memoir. (Suspecting that this experience would define her, aides encouraged her to keep notes.)

Two weeks after that call with Dimon—and about two weeks after Harris turned down Obama’s State of the Union invitation—the banks came back with a settlement that would ultimately send some $20 billion to California, 10 times their original offer.

Immediately, consumer advocates saw too many concessions in a settlement that didn’t go nearly as far as they wanted. “It’s OK, it’s a step forward,” Ira Rheingold, the executive director of the National Association of Consumer Advocates, told Reuters at the time. Progressive activists still complain that the people most in need of relief—including many minority homeowners and those whose limited English had led them to fall for bad deals—were unable to get it. Harris started a mortgage task force and pushed legislation to increase lenders’ liability, but no one ended up in jail. When I asked Rheingold this week to reflect, he said he wished that the settlement had done more to force the banks to reduce the amount of principal Americans owed on their mortgages. “Do I think the settlement should have been better? Sure. But I think in the context of its times, the AGs probably got more than the federal government,” he told me. Did Harris fail progressives? “Oh, please, no,” he said.

Harris hired Katie Porter to oversee the administration of the settlement in California. Picking her as a tough enforcer of the settlement was only possible, Porter told me, because of how Harris had approached the negotiations. Harris, Porter told me, “had an important insight there: that this isn’t how it’s supposed to work. Justice is supposed to mean that things actually change, that bad behavior actually stops.” Harris was very clear, Porter said: “I expect their actions to actually change. I expect them to actually comply with the settlement.” Porter had been recommended to Harris by Elizabeth Warren, who had taught Porter at Harvard Law. Porter’s progressive bona fides are pretty solid, and she told me that anyone who saw Harris as having given in doesn’t understand what happened. “I had to deal with a lot of advocates and others who didn’t think [the settlement] did enough and didn’t think it fixed everything. And I would say yes and yes to those things,” Porter told me. “But in California we were very effective in … delivering help, and we were able to do that in part because of the bravery and the courage that she showed in walking out from the [initial] settlement.”

The final deal was Harris’s first entry into national politics. In October 2012, Warren asked Harris to pop over to Massachusetts for a campaign event that painted Harris as the hero of the mortgage settlement. Warren was “going to be a champion for real oversight of banks and financial institutions. She’s going to be a champion for housing policies that make sense for the middle class and help get people back to building wealth and homeownership,” Harris said at the event, according to her notes, which I obtained. During her presidential run, Harris continued to draw attacks from some activists on the left for giving in too much. But “Kamala and her team stayed after the banks to make sure they followed through, while many others did not,” Warren said in a statement an aide sent me on Tuesday. “She deserves credit for that.”

A year after the deal was done, Joe Biden spoke at the National Association of Attorneys General meeting. Beau Biden led his father around the room, meeting one AG at a time. When they got to her, Beau introduced Harris like he was putting a face to the new friend he had clearly been telling his dad about: “This is Kamala!” An aide snapped a cellphone picture, the future running mates deep in conversation for the first time, holding each other’s hands.

“We were really friends,” Harris told me of her late colleague.

Last week in Wilmington, as the Democratic nominee officially introduced Harris, standing for the first time behind the logo with both their names on it, he said the same. “I came first to know who Kamala was through our son,” Biden said, as Harris nodded. “I know how much Beau respected Kamala and her work. And that mattered a lot to me, to be honest with you, as I made this decision.”