Posted by AzBlueMeanie:
This is not "justice." This is another injustice heaped upon the injustices that the banksters of Wall Street have already been permitted to get away with.
50 44 states attorneys general have been negotiating a global settlement agreement with the banksters of Wall Street for months now. Several states attorneys general, including Eric Schneiderman of New York and Beau Biden of Deleware who are pursuing criminal investigations for fraud, have left the settlement negotiations over concerns that the banksters of Wall Street would not be held accountable for their actions.
Last week Gretchen Morgenson of the New York Times reported on rumors of a settlement. A Foreclosure Settlement That Wouldn’t Sting - NYTimes.com:
While the exact terms remain under wraps, some aspects of this agreement — between banks on one side, and the federal government and a raft of state attorneys general on the other — are coming into focus.
Things could change, of course, and the deal could go by the boards. But here’s the state of play, according to people who have been briefed on the negotiations but were not authorized to discuss them publicly.
Cutting to the chase: if you thought this was the deal that would hold banks accountable for filing phony documents in courts, foreclosing without showing they had the legal right to do so and generally running roughshod over anyone who opposed them, you are likely to be disappointed.
This may not qualify as a shock. Accountability has been mostly A.W.O.L. in the aftermath of the 2008 financial crisis. A handful of state attorneys general became so troubled by the direction this deal was taking that they dropped out of the talks. Officials from Delaware, New York, Massachusetts and Nevada feared that the settlement would preclude further investigations, and would wind up being a gift to the banks.
It looks as if they were right to worry. As things stand, the settlement, said to total about $25 billion, would cost banks very little in actual cash — $3.5 billion to $5 billion. A dozen or so financial companies would contribute that money.
The rest — an estimated $20 billion — would consist of credits to banks that agree to reduce a predetermined dollar amount of principal owed on mortgages that they own or service for private investors. How many credits would accrue to a bank is unclear, but the amount would be based on a formula agreed to by the negotiators. A bank that writes down a second lien, for example, would receive a different amount from one that writes down a first lien.
Sure, $5 billion in cash isn’t nada. But government officials have held out this deal as the penalty for years of what they saw as unlawful foreclosure practices. A few billion spread among a dozen or so institutions wouldn’t seem a heavy burden, especially when considering the harm that was done.
* * *
Shaun Donovan, secretary of Housing and Urban Development, said the settlement, which is still being worked out, would hold banks accountable. “We continue to make progress toward the key goals of the settlement, which are to establish strong protections for homeowners in the way their loans are serviced across every type of loan and to ensure real relief for homeowners, including the most substantial principal writedown that has occurred throughout this crisis.”
Still, a mountain of troubled mortgages would not be covered by this deal. Borrowers with loans held by Fannie Mae and Freddie Mac would be excluded, for example. Only loans that the banks hold on their books or that they service for investors would be involved.
One of the oddest terms is that the banks would give $1,500 to any borrower who lost his or her home to foreclosure since September 2008. For people whose foreclosures were done properly, this would be a windfall. For those wrongfully evicted, it would be pathetic. Roughly $1.5 billion in cash is expected to go into this pot.
The rest of the cash that would be paid by the banks is expected to be split this way: the federal government would get about $750 million, state bank regulators about $90 million. Participating states would share about $2.7 billion. That money is expected to finance legal aid programs, housing counselors and other borrower support. If 45 states participated, that would work out to about $60 million apiece.
OBVIOUSLY, the loan modifications would make up a majority of the deal. And this is where real questions arise. For example, how can we be sure this plan won’t reward banks for modifications that they would have agreed to or should already have done absent the deal?
Perhaps most important, will the banks change the terms of loans enough to ensure that borrowers can actually meet their obligations over time? Or will these modifications default again, as is often the case? If so, the banks will have received a lucrative credit, even though borrowers fall back into trouble.
Such concerns are justified because past settlements promising big help to borrowers have failed to live up to their hype.
* * *
The deal being discussed now may also release the big banks that are members of MERS, the electronic mortgage registry, from the threat of some future legal liability for actions involving that organization. MERS, which wreaked havoc with land records across the country, was sued last week by Beau Biden, Delaware’s attorney general, on accusations of deceptive trade practices.
The MERS registry was also subpoenaed last week by Eric Schneiderman, the attorney general of New York, as part of his investigation into the fun-while-it-lasted mortgage securitization fest. If he were to sign on to the settlement, his investigation into MERS could not move forward.
“Rules matter,” Mr. Biden said in announcing his suit. “A homeowner has the obligation to pay the mortgage on time and lenders must follow the rules if they are seeking to take away someone’s house through foreclosure.”
Abiding by the rules has not been the modus operandi in the foreclosure arena. That’s why any settlement must be tough, truly beneficial to borrowers and monitored for compliance. Otherwise, the deal would be another case where our government let the big banks win while Main Street loses.
Mike Lux writes at crooksandliars.com Obama on Banking: The Worst Deal They Could Cut:
[A]s more details emerge, it looks even worse than a lot of us who have been following this issue thought it would be. We already knew that the $25 billion fund being created would only cover 5 percent of the underwater mortgage foreclosure problem, but Morgenson reports that most of the $25 billion isn't from the banks themselves, but from taxpayers. A dozen banks would contribute a grand total of $3.5 to $5 billion toward the settlement, pocket change for massive companies that apparently approved their foreclosure mill law firms likely committing over 1,000,000 counts of perjury in the robo-signing process. The rest of the money, about $20 billion, would come in the form of "credits" banks essentially give themselves if they agree to reduce a certain amount of the principal owed on mortgages. We don't know the details yet, but given that all banks in the home lending industry write down some mortgages, unless the details are tough on the banks (a phrase not generally heard of among regulators in this era), this will be giving banks credit for mortgages they would be writing down anyway. And if they don't end up writing down as much as they project, they probably won't end up being penalized for it given the history of programs like HAMP.
And in exchange for the pocket change penalty and agreeing to get credit for doing what they would have done anyway (which would be very big of them), banks would be given legal immunity for all those perjury counts and all the other fraudulent activity done through the MERS corporation — a shell corporation set up by the biggest banks to help them securitize all those mortgages into the financial products that caused the housing bubble and financial panic of 2008.
* * *
[I]n the short run, if housing stays dead and more than a quarter of homeowners stay underwater in their mortgages, this economy will not start producing significant numbers of new jobs, because the housing problems are so big they will drown everything else out. And giving away so much of the legal leverage we have over these bankers without negotiating to force them to write down those underwater mortgages will guarantee us a dead economy for many years to come. Welcome to Japan’s Lost Decade, squared.
It would be bad enough for Obama to make this economic decision that will likely ensure jobs don't start picking up before next year's election. Even worse for him, though, is the deadliest, most toxic political situation this puts him in. In a front page article in the Washington Post on Oct. 14, it was reported that "President Obama and his team have decided to turn public anger at Wall Street into a central tenet of their re-election strategy." David Plouffe was quoted as saying "We intend to make it [being tough on Wall Street] one of the central elements of the campaign next year." And they are absolutely right to do so, as that kind of populist messaging against the most unpopular institution in America is exactly what the doctor ordered in these tough times.
I have been advocating a tough-on-Wall Street message for the Obama White House ever since they took office, and couldn’t have been more pleased to see this emerge as a central strategy. But if the administration rams through this ultimate in Wall Street sweetheart deals — a laughably pocket change fine combined with “credit” for what they would have done anyway, at the expense for a get out of jail free card for 1 million counts of perjury and a wide range of other potential fraud — they will have zero credibility to run as the tough on Wall Street candidate. ZERO. And look, it won't be just me who will notice how bad this deal is — and I'm a ton more sympathetic to the President than many of the people who will.
* * *
This makes no sense. For example, for the Obama administration to be leaning so hard on California Attorney General Kamala Harris to sign off on this is truly politically suicidal, both for them and for her after she so strongly announced she was pulling out a couple of weeks ago. Yet they continue to push her. Why are they pushing so hard for this? It all boils down to Treasury Secretary Tim Geithner.
It is apparent that Geithner believes the only thing that matters in terms of fixing the economy is to keep the big banks in good financial shape, which is ironic given that in public he claims that everything is fine with the banking sector now. Given the mistakes some of these big banks made in the housing bubble era, keeping some of them afloat has been a heavy lift, but Geithner is determined to keep these banks whole. If that means massive bailouts, that's the price we have to pay. If that means 10,000,000 foreclosures and 25 percent or more homeowners underwater, that's okay too. If it means slow-walking resolution authority for Citibank in spite of the President's orders to take it over and start to sell off its assets, okay. If it means continued 9 percent unemployment, it's what we have to do. And if it means waiving legal liability for 1 million counts of perjury and all kinds of other fraud, whatever.
* * *
Here's the other thing: Geithner and others in the administration are just plain wrong when they say the administration can't do anything to, say, force mortgage writedowns. In the press briefing announcing the steps the administration was taking to make refinancing mortgages less costly, Gene Sperling was being asked why the administration wasn't taking bigger steps to deal with underwater mortgages, and he responded by saying this was the only thing they could get all the stakeholders, including the banks, to agree to. He was very clear that they didn't think they could do anything the banks didn't say yes to. But the big banks have violated so many laws, and have been so "creative" with their accounting, that there are all kinds of levers the administration has over them if they would only use them- or let the people who do want to use them like New York AG Eric Schneiderman and Delaware AG Beau Biden. One of the leading policy experts on this in the country, someone who has been deeply involved in all these issues for years, told me that if the President wanted to get the banks to do something on mortgage writedown, it would take a group of smart lawyers and accountants about five hours to figure out how to bring the banks to heel.
* * *
But the cult of Geithner seems to reign supreme inside this administration. No matter how much damage Geithner’s policies will do to this President, the administration is still following his lead. Right now, the administration's best hope is that public outcry and courageous AGs bucking this deal will save them from themselves. Harris is a key player in all this because if big states like California stay out of the deal, along with New York and Delaware and a couple of other states, it probably can't go forward. Harris backed away from the deal a few weeks back, bringing joy to all those California activists who were working on the issue, but is being hammered by the administration and Wall Street to come back inside their tent. But nothing has changed on the deal, except that maybe it has gotten even worse. If Harris stays out, other AGs pull out, and other key players raise hell, it is a huge plus because if this deal falls apart, it would be the best political news this administration has had since the President started promoting his jobs bill and the millionaires' tax.
This is high-stakes drama, folks. Pay close attention to what happens next, because it may well determine the fate of both the American economy for the next 10 years and the 2012 election. . . You can’t give the Wall Street guys the ultimate sweetheart deal, and then try to run against Wall Street, or run as fighting for the middle class. As my old boss Bill Clinton used to say, that dog just won’t hunt.