Bank Bailout 2: Obama Lets Mortgage Abusers Off the Hook

The Obama administration announced this morning that the five largest U.S. banks have agreed to a $26 billion 'settlement' to end lawsuits over abusive practices that forced millions of families from their homes and helped bring about the nation's financial meltdown.

After months of talks with state and federal officials, the banks have reportedly agreed to help some homeowners reduce their mortgage debt or refinance their homes at lower rates. Over 4 million familes lost their homes to foreclosure yet just 750,000 people who lost their homes to foreclosure will receive a one-time check for just $1,800 to $2,000, which for many will barely cover the cost of moving. The deal will only help a fraction of the struggling homeowners affected by the bank's practices.

New York and California have reportedly signed off on the deal after initially holding it up in protest of lenient treatment of the banks.

The deal gives banks immunity from civil lawsuits for "robosigning," a practice whereby homeowners were rapidly evicted without proper vetting.

In his January 24th State of the Union address, President Obama promised a fresh investigation into mortgage abuses that led to the financial meltdown. Now, before that investigation has even begun, Obama is granting these 5 "too big to fail" banks immunity from "robo-signing" abuses.

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UPDATE: Matt Taibbi writing at Rolling Stone:

...this looks like America's public prosecutors just wilted before the prospect of a long, drawn-out conflict with an army of highly-paid, determined white-shoe banker lawyers. The message this sends is that if you commit crimes on a large enough scale, and have enough high-priced legal talent sitting at the negotiating table after you get caught, the government will ultimately back down, conceding the inferiority of its resources.

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Yves Smith, writing at NakedCapitalism:

The Top Twelve Reasons Why You Should Hate the Mortgage Settlement

[...] As we've said before, this settlement is yet another raw demonstration of who wields power in America, and it isn't you and me. It's bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.

1. We've now set a price for forgeries and fabricating documents. It's $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It's a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.

2. "If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating."That $26 billion is actually $5 billion of bank money and the rest is your money. [...]

3. That $5 billion divided among the big banks wouldn't even represent a significant quarterly hit. [...]

4. That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.

5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. [...]

6. The past history of servicer consent decrees shows the servicers all fail to comply. Why? Servicer records and systems are terrible in the best of times, and their systems and fee structures aren't set up to handle much in the way of delinquencies. [...]

7. The cave-in Nevada and Arizona on the Countrywide settlement suit is a special gift for Bank of America, who is by far the worst offender in the chain of title disaster. This move proves that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced. [...]

8. If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating. It's a bad idea to settle obvious, widespread wrongdoing on the cheap. [...]

9. There is plenty of evidence of widespread abuses that appear not to be on the attorney generals' or media's radar, such as servicer driven foreclosures and looting of investors' funds via impermissible and inflated charges. While no serious probe was undertaken, even the limited or peripheral investigations show massive failures (60% of documents had errors in AGs/Fed's pathetically small sample). [...]

10. A deal on robosigning serves to cover up the much deeper chain of title problem. [...]

11. Don't bet on a deus ex machina in terms of the new Federal foreclosure task force to improve this picture much. If you think Schneiderman, as a co-chairman who already has a full time day job in New York, is going to outfox a bunch of DC insiders who are part of the problem, I have a bridge I'd like to sell to you.

12. We'll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. [...]

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And at Firedoglake, Scarecrow writes of the 'settlement':

Obama's Guiding Principle: Leave No One Accountable

Obama's people have performed this function for America's looters over and over again. They did it for Wall Street, the banks, the rich tax evaders, the insurance companies, the oil companies, the gas companies, the coal companies, the CIA, the DoD, and numerous torturers and their legal/policy enablers and associated war criminals in the previous administration.[...] The Obama Administration has followed a predictable pattern we now recognize. It has consistently functioned like criminal defense counsel, whose mission is to get their criminal clients, the major corporations and executives who fund their elections, off with no admission of guilt, no forced resignations, and as little harm to their reputation, or that of the counsel, as possible. To do this, they neutralize anyone with an ounce of public purpose in their veins.

Its role is then to convince the public that whatever you thought or feared was going on in America, and whoever you believed had caused the collapse of America's economy, caused millions to lose their jobs, their homes and their retirements and continued to loot the country, it's time to look forward. Because everyone who matters -- and that's not you -- now agrees, they say, to function in the public interest, even though it's a bald face lie, since nothing has changed and the looters and their complicit overseers are still in charge.

Obama's people have performed this function for America's looters over and over again. They did it for Wall Street, the banks, the rich tax evaders, the insurance companies, the oil companies, the gas companies, the coal companies, the CIA, the DoD, and numerous torturers and their legal/policy enablers and associated war criminals in the previous administration.

Consistent with this strategy, Obama's team must silence, neutralize or punish anyone who protests or blows the whistle on the massive criminality and corruption involved. It must also emasculate the left and what's left of the liberal wing of the Dem Party, using the argument that the Administration is not nearly as awful as the other Party's people, who openly glorify looting and killing and vilifying the victims.

But of course, when we were ruled by the latter, everyone with any humanity was repulsed by the open looting and killing and indifference and was willing to say so. When the Administration sanctions it, however, we are supposed to bite our tongues, because it could be worse.

Well, it's worse, and it's more insidious and corrupting of our souls than where we were four years ago. It is evil.

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