Bank Bailout Day, February 9, 2012
I may or may not have more to say about this.
But I’m thinking of declaring this Bank Bailout Day, a holiday of the stature of President’s day.
Forty-nine states, every one but Oklahoma, as well as federal regulators, will participate in a foreclosure fraud settlement that will release the five biggest banks (Wells Fargo, Citi, Ally/GMAC, JPMorgan Chase and Bank of America) and their mortgage servicing units from liability for robo-signing and other forms of servicer abuse, in exchange for $25 billion in funding for legal aid, refinancing, short sales, restitution for wrongful foreclosures and principal reduction for underwater borrowers. The announcement will be made on Thursday.
[click through for the details]
And then there’s the settlement price: $25 billion, divided up several ways. $3 billion will go toward refinancing for current borrowers who are underwater on their loans, as well as short sales. $5 billion will go as a hard cash penalty to the states, which can use them for legal aid services, foreclosure mitigation programs, and ongoing fraud investigations in other areas (one official close to the talks feared that much of that hard cash payout will go in some Republican states toward filling their budget holes). The federal government will get a cash penalty as well. Out of that $5 billion, up to 750,000 borrowers wrongfully foreclosed upon will get a $1,800-$2,000 check if they sign up for it, the equivalent of saying to them “sorry we stole your home, here’s two months rent.”
If you read DDay’s full post (or if you’ve read anything here), it’s clear that the amount of fraud was astronomical: 60% failures in one case. And if you’ve read that far, you know this is a bail out, every much as the billions gifted to banks in September 2008 was a bailout.
The Administration wants to call this a settlement.
I’d love to read President Obama’s book in 10 or 15 years, to see what he says about this. Should be interesting to hear the reasoning behind the this. After all, the President said the banks didn’t break any laws.
It just makes me sick. This was a big land grab from the beginning. Now there will be millions of pre-owned houses for rent by the newly forming REITs taking over complete developments. Renter Nation.
Believe it or not, it started with Nixon. Yes, Tricky Dick, who eliminated Regulation Q from interstate banking. Regulation Q limited the interest rates for S&L’s and “created” the locally owned bank mortgage business by prohibiting commercial banks from entering the residential market. Once that was gone, and commercial banks issued residential mortgages, the % of money from the local banks flowed to NY (leading to the S&L disaster and Michael Milken’s bonds). Of course, once the NY financial industry “matured” under Reagan, the banksters realized the gains to be had. (Only Paul Volker threatened it with his interest rate hikes, for a while). By the time Bush was in office, wanting an Iraq war, along with the dot com bust, there was no inflationary vehicle left to pay for the war except for a housing boom. And Alan Greenspan was all to happy to oblige. Then, the local banks died, the local developers couldn’t compete, the local builders went under all sacrificed to the publicly traded national homebuilders: Centex, Pulte, NV, Craftmark, Ryan, etc. etc. Then the Natl Homebuilders got into the mortgage business themselves: (get the mortage with Pulte, and get a free hardwood floor, ad nauseum) and those mortages flipped so fast you couldn’t say “tranch.” It was a feeding frenzy. And desperate parents, grasping at any straw to live in a good school district bought it. At least a lot did. Oh, and the municipalities and counties went right along with it, approving developments with HOA-controlled private roads and private services so that their budgets wouldn’t be depleted. Everyone SOLD OUT on a grand scale. And now the little people are getting two months rent for enriching the banks and the builders. And the new REITS will control the rental market for decades. A paid off house will be the gold standard that kids and grandkids inherit.
Land grab it is. (See MERS, etc.)
“There’s a bailout coming and it’s not for you. It’s for all those creeps hiding what they do.”
Government, the great teacher….
I call it a pardon.
Banks are now going to be off the hook for thousands of acts of perjury. The $25B is simply the lawyers’ fees.
Poor Scooter Libby. If only he worked for a bank instead of the VP, then he’d have gotten his pardon, too.
This is so insane, disgusting and depressing….once again, we have been sold out. No accountability, no deterrence.
Dayen’s report says a judge has to sign off on it. Any judge? (So they can pick one they know will sign off?)
Is there any way that the settlement can be challenged in court before it takes effect?
If so, discovery could be interesting….the AGs have ample evidence of the magnitude of this fraud, of every aspect of it that they are forgiving with this settlement. And I’d like to see the depositions about the White House pressure on AGs to sign on. (Beau Biden alluded to the pressure on the Dylan Radigan show a few days ago…said something to the effect that ‘when AGs in states with budget woes see large checks waved in front of them, it’s hard to resist’)
How may a judge simply “sign off” on “this”?
Is the implication that there will be NO continuing review, no ongoing over-arching supervision by a court?
Perhaps someone, an attorney, might clarify this very interesting question?
@DWBartoo: Fractal just commented (#58) on David Dayen’s post that normally there is court supervision on settlements like this but apparently there’s not one on this deal. (Of course, I remember that Ashcroft was appointed to be the court monitor for settlements–and make big bucks doing so–a few years back so I guess the quality of the monitor is also relevant.)
I’d really like to know who selects the judge who will sign off on this and if it’s just a formality or if he/she can actually reject this atrocity.
You know, you see this stuff coming, you prepare for it, but it still enrages you. What a huge disappointment.
The immunity provision is the worst part. Why did Schneiderman, California’s AG, Beau Biden and others sign off on this? I just hope there are many other avenues left to nail these fraudsters.
For shame, Obama.
Bob in AZ
I think it is likely that this is a bigger bailout than the infamous 2008 bailout and the Fed bailouts that happened in the background (and continue).
Glad that you are writing on this. I am so incensed that it will take me awhile to get my thoughts straight enough to write about it.
How are they going to clear the titles? i.e., uncloud the titles? I’ll bet there’s a slew of lots that aren’t even platted, given the extent to which local registrations were by-passed. Do they have to register all the lots now? And pay the fees to the localities? THAT is where the real penalties (if there were any!) should go — that is, in addition to making the foreclosees whole.
The title issue will be the sellout’s undoing if it happens, and it most likely will arise from a bankster turf war over who owns what property. After all there are documented instances of two banks foreclosing on the same house. The homeowner has rights, but not enough $$$
Did you go to the links and timeline I linked to in you “Short Sale” post?
You could make one amazing evidence timeline for a congressional proposal for Bank Bailout Day.
So, what do you think the form of blackmail was in all of this?
@rugger9: I think that in all cases of foreclosure, from here on out, the bank claiming title must have proof of title, and not just claim it. As it is, if there is a question of title, the burden of proof is on the homeowner, not the putative titleholder. That’s not fair. Of course, a judge would still have to sign off on it, and some judges would have a very low standard of proof, but as it is now, there is no standard of proof unless the unlucky homeowner is able to find a lawyer. This is just wrong, especially under today’s conditions.
Bob in AZ
The GROSS amount of the alleged fine amounts to only about ONE PERCENT of the actual amount stolen. THIS contains a very good summary.
MoveOn.org is claiming that the deal isn’t as bad as it might seem. I received an email from them with this summary:
Bob in AZ
What in the world are they smoking at MoveOn?
This is Mr. Obama’s greatest day. He has secured the financial backing of the MOTU for his re-election, or else their promises of it. (And who inside the Beltway or on Manhattan Island doesn’t keep their promises?)
Barack Obama has dismissed the claims of millions of average Americans, thereby condemning them to increased penury and dependence on minimum wage jobs, which condemn their children to less. He thus plays not Tom Hanks’ role in Road to Perdition; he plays Daniel Craig’s.
It is impossible to underestimate how thoroughly and brutally this settlement assaults average Americans. It is impossible to understate how it exalts the wealth and power of the CEO’s of the biggest banks, whose businesses and careers he has freed from being responsible for their financial crimes. They have cost America hundreds of billions of dollars.
Mr. Obama has not stabilized the American financial system through this supine deference to the interests of the financial oligarchs. He has ensured that the financial merry go round will swing round to this same brass ring time and again.
Obama has become a secular pope, a medieval one. He has sold absolution for capital crimes and the key to heaven for re-election gold. He has washed not his own hands, he has washed the feet of the oligarchs.
I agree with the comment that this is a presidential pardon in all but name. It places the harm done for unprecedented financial crimes onto their victims more insidiously than could any defense attorney’s brutal questioning of a rape victim.
As bad as is Mr. Obama granting of absolution, the process he has championed is worse. It usurps state and federal laws and criminal justice systems.
Yes, state attorneys general and state governors found this just as attractive as did the White House or the banksters, or found themselves coerced into making believe they did. But this absolution of capital crimes emanates from the White House. It designed it, it advocated for it, it twisted arms and drew in countless favors to make it so.
The political calculation is plain. Average Americans have no alternative to Mr. Obama that would do them less harm. Average Americans will have to work together to give themselves a government that doesn’t tie them to the rack at the whim of the Monarch of the Beltway and the lords of Manhattan.
A red herring in this mess is that this settlement prevents states and the feds from taking concerted legal action against the financial fraud industry, but preserves the right of each wronged homeowner to do so. That’s akin to the long discredited notion that a single employee had the same bargaining power to determine wages and working conditions as his or her employer.
When was the last time you tried to fix an inaccurate bank or credit card statement? How long and how much work did that involve?
The notion that Abdul, Juan, Mary, or Lindsay could make Citibank, its loan processing and home foreclosure agents pay for their crimes, or even obtain adequate discovery about them, is laughable. The odds are about the same as a street kid making the NBA. That is the political beauty of this “settlement”: it preserves the image of accountability, though not credibly, while throwing its substance into the dustbin, along with the homes of millions.
A few isolated, if large cases, remain outside this “settlement”. Whether they yield accountability will take years to determine. But by diffusing focus, by creating momentum for the nostrum that “these claims have been settled”, by reducing the stick state and federal governments had to compel accountability – and to compel changes in business practices – Mr. Obama has taken the banks off of a sharp hook they hoisted themselves on and seated them comfortably on the hand-made furniture in their private clubs.
This was an unforced fumble by Obama, and it’s already being scorned on the internet.
Serves him right, he didn’t need to do this and every one of the millions of voters hosed by the banks will take it out on Obama for blocking them off from justice. Earl’s comment on red herrings is right, this one smells more like lutefisk.
On the GOP side they might actually get the go-ahead to slam this settlement on anti-Obama grounds as well as get-elected grounds. Rhetoric is cheap on that side, essentially meaningless.
I wonder what they were offered.
If only anonymous could get a hold of moveon’s email list..
@shekissesfrogs: Well, given their hacking skills, they can probably get it if they want it.
Bob in AZ
Go pull that Santorum flag out. His voting record should surely get in his way