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As you probably know, the big news today was the announcement of an agreement between 49 state attorneys general (all but Oklahoma’s, who doesn’t think banks should have any liability for the mortgage crisis) and the nation’s five largest mortgage lenders that will insulate the banks from state prosecution for foreclosure fraud, in exchange for $26 billion in “relief.”
I’ll just quote David Dayen’s description of the payout from FDL:
$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.”
The bulk of the money, around $17 billion, will go to principal reduction credits for troubled borrowers. The banks will not get dollar-for-dollar credit for every write-down; reductions on loans bundled in private-label mortgage-backed securities, for example, will be under 50 cents on the dollar, and write-downs for second liens (mostly home equity lines of credit) will be more like 10 cents. Housing and Urban Development Secretary Shaun Donovan believes that they will be able to get between $35-$40 billion in principal reduction in real dollars out of the settlement.
The settlement is being generally evaluated as “a lot better than nothing,” but hardly a triumph of justice, since it will address a small percentage of the $750 billion of “negative equity” in the housing market, while getting the banks off the hook for potential criminal liability (though investigations and potential prosecutions can proceed on misdeeds not covered in the settlement).
Given the enormity of the problem—both for individuals and for the country—Mark Gongloff’s conclusion about the settlement seems apt:
If you were explaining this to fifth graders, you’d say that you were turning a hole that was ‘two infinities’ deep into a hole that was ‘one infinity’ deep. It’s still an infinity for most homeowners and gives them little reason not to just walk away from the hole.
Ugh.
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bettheclock on February 09, 2012 3:11 PM:
WOW! Let's go to Vegas and run that 1800 smackeroos up.
I have rarely seen my very Progressive wife so upset about government.
Danp on February 09, 2012 3:12 PM:
Overall the last decade was a very lucrative time for bank scams. And the governments get a tip. Maybe it is time to put guillotines on the mall.
Mudge on February 09, 2012 3:15 PM:
I guess this means Bernie Madoff gets a pardon.
JW on February 09, 2012 3:34 PM:
I'll say it again: What this country needs is a a second party, i.e., it needs to establish a two party system.
Danny on February 09, 2012 3:55 PM:
I have no idea why in God's name you would link to Firedoglake under any circumstances. Hamsher website's got a business model to be the Glenn Becks of the left. I.e. Obama hate - all day, every day; journalistic integrity or any other integrity not only optional but actively discouraged.
Anyone who spends just a little bit of time on FDL, reading the comments and checking out their "community" ought to know that not only are just as full of irrational, race-driven hate against the President as ever a gated community in South Carolina, but they also care so little about truth, intellectual honesty and common decency, that if we're gonna refer to them as authorities on anything we might as well shut up about Glenn Beck and Rush Limbaugh, because Jane's place is every bit as bad.
TBogg being the one exception. But you are the company you keep. If he shows improved judgement and gets out of there I'll start following his stuff again.
Danny on February 09, 2012 4:05 PM:
E.g. this reader diary was promoted to the FDL frontpage and stayed there for a day, at the time of Bin Ladens demise:
Did The US Intend To Torture Bin Ladens Children?
http://my.firedoglake.com/jimwhite/2011/05/09/did-the-us-intend-to-torture-bin-ladens-children/
In the midst of the ongoing orgy of adulation for Seal Team Six killing Osama Bin Laden and the former Vice President appearing on television to advocate a return to waterboarding as official US torture policy, there has been little attention to the fact that Pakistan took several wives and children of Bin Laden into custody after the US raid of the compound. The US now seeks access to these family members. Did the US intend to torture these children with insects as they did Khalid Sheikh Mohammed’s children, if the helicopter on which they would have flown had not been destroyed?
Again, this is a reader diary, but par for the course and typical of the FDL community. Anyone who spent a few hours there in the last couple of years knows this.
If we're gonna tolerate and even promote this kind of sh-t we have absolutely nothing on the wingnuts.
Trollop on February 09, 2012 4:08 PM:
Ms. Hampster aside, another fine example of money wins!
We really should elect Mitt Gingrich as a metaphorical figure at the very least.
Time to up your Cymbalta ladies..
SteveT on February 09, 2012 4:28 PM:
There is one question that I want answered:
How much money did the five Wall Street banks make through the illegal actions covered in this settlement?
If the answer is more than $26 billion, then the settlement is a sellout and a travesty.
Kathryn on February 09, 2012 4:29 PM:
Lucky to be old and not effected by the housing nightmares, so just a question. What settlement do you think would have been negotiated if George Bush were still president or if it were the first term of a Romney or Santorum presidency?
schtick on February 09, 2012 4:30 PM:
Money talks. It's free speech.
crapcha....Grand irdingle....exactly!
mk3872 on February 09, 2012 4:52 PM:
I don't get it how journalists, bloggers and analysts like Kilgore continue to compare this settlement for the "robo-signing" episode with the entire housing bubble bust from 2008.
The hole that was dug during the bust was not from this robo-signing problem. And the settlement was NOT meant to solve that problem.
The banks wanted protection from the millions of lawsuits, the government wanted help to homeowners and that's what we got.
It's called a settlement because all parties win something.
This was NOT about the big hole created by the housing bubble!!
mk3872 on February 09, 2012 5:01 PM:
BTW, to those of you progressive freak-outs, this settlement does NOT preclude states like NY from continuing with their existing lawsuits against the banks.
If your entire purpose is to see banks PUNISHED, then any kind of a compromise or settlement will not placate you anyway.
RP on February 09, 2012 5:05 PM:
THANK YOU mk3872. The reporting on this has been awful.
SteveT on February 09, 2012 5:17 PM:
mk3872 said:
. . . this settlement does NOT preclude states like NY from continuing with their existing lawsuits against the banks.
It doesn't. But the robosigning violations are easy to prove and most definitely illegal -- unlike some of the other activities the Wall Street banks engaged in.
My suggestion for a fair penalty would be that each mortgage where fraudulent paperwork was submitted would be voided -- stamped "Paid in Full" -- plus two additional underwater mortgages would be voided as a penalty. The alternative would be to charge bank executives with multiple cases of perjury.
rbe1 on February 09, 2012 6:25 PM:
Sounds like the current phase of the Greek bailout to me.
exlibra on February 09, 2012 6:44 PM:
Since, like several commenters up-thread, I don't put much trust in Hamsher or her cohorts, my first question was: what does Schneiderman say about this? Because he was going gangbusters after the banks (till I thought he was due "Spitzer treatment") and then, suddenly, went silent, while the last of the buttons were being buttoned on the deal. Thankfully, "the old broom" (Steve Benen) had, at the new place, a reference to an interview with the man. Straight from the horse's mouth:
http://www.washingtonpost.com/blogs/plum-line/post/schneiderman-settlement-deal-a-small-but-significant-step-towards-real-accountability/2012/02/09/gIQAw7P21Q_blog.html
Mary on February 09, 2012 6:58 PM:
Thanks to those of you hitting back at FDL. I was trying to think what to say & had just come up with 'moonies' of the Left!
They are often fact-free!
Anonymous on February 09, 2012 7:00 PM:
"My suggestion for a fair penalty would be that each mortgage where fraudulent paperwork was submitted would be voided -- stamped "Paid in Full" -- plus two additional underwater mortgages would be voided as a penalty."
Why would giving free houses to people who entered into risky loans be fair? Robo-signing has nothing to do with unwise loans being made, nothing to do with the borrower's default and virtually nothing to do with the housing bubble and subsequent collapse. Other types of fraudulent documents have something to do with those things, but not very much. Blaming the housing catastrophe on fraudulent documents is the intellectual equivalent of blaming it on government programs encouraging lending to the poor and minorities. In addition to being trivial, it gets in the way of learning anything from the collapse. The problem wasn't that naughty people did naughty things (although, as always, there were lots of naughty people who did naughty things), it was that there were systemic incentives to make stupid loans and a wrongful, if not corrupt, decision by the government to socialize the lenders' losses while providing little relief to borrowers.
thisdave on February 09, 2012 7:47 PM:
This whole "settlement" walks, quacks and stinks like a shakedown. Squeeze banksters into forking over a bunch of money, but not too much, and the Justice (ha) Dept. backs away. Then the administration distributes the dough to voters during an election year.
When Rove shot a load of "Chicago-style" sanctimony at the Chrysler ad, he aimed at the wrong target. I, too, wish Hamsher & Co. would pull their heads out of their bottoms (TBogg is cool, of course). But there's not a single thing to like about this burning sack of political waste Barry and his crew have dropped on our doorstep. Shameful.
Doug on February 09, 2012 8:01 PM:
Talk about crappy reporting!
According to the NYT (the statements are theirs, the questions are mine):
One fifth of those with mortgages now owe more than their home is worth by an average of $50,000. No mention of the total number of mortgages?
One half of ALL mortgages in the US are held by either Freddy Mac or Fannie Mae. Again, no mention of the total number of mortgages in the country?
Since 2007 four million homeowners have been foreclosed on. What percentage of the total number of homeowners does this represent?
One million homeowners are expected to either have their principle reduced or be allowed to refinance at current, lower, rates. Again, what percentage of those with mortgages is this?
750,000 (former)homeowners will receive checks of $1800 to $2000. Out of how many total former owners?
Without any idea of the total number of mortgages held in this country, there is no way to determine what percentage of homeowners will be affected by this agreement and thus how much this agreement will affect prices and the housing market. The ONLY reporting on the total number of mortgages currently underwater that I could find was in David Dayen's report, where he states there are 11 million home mortgages currently underwater. I have no idea how accurate that number is, but if correct, that means there are currently is, at least, a total of 55 million mortgages in the US. However, while fifty percent of the homeowners are out of the loop because their mortgages are held by Freddy and Fanny, there is nothing to tell us how many of those underwater mortgages are held by Freddy and Fanny.
IF the 11 million is divided equally between mortgages held by Freddy/Fanny and those held by other financial institutions, this agreement has the potential to affect approxiately 20% of those eligible and 10% of the total number of those currently underwater on their mortgages. Not too bad.
That MAY be enough to stop the bleeding, but it certainly isn't a cure.
ps: Hope I don't have to pay Komen's for using the word "cure"!
Rabbler on February 09, 2012 8:10 PM:
Gongloff's conclusion seems a tad pretentious. Is he having trouble impressing 5th graders?
Alli on February 09, 2012 8:38 PM:
For the love of God Ed don't quote anything from FDL here. And the last quote? about explaining to fifth graders? I'm in my thirties and I have no damn idea what the heck he's trying to say.
FriscoSF on February 09, 2012 9:44 PM:
mk3872 ...'If your entire purpose is to see banks PUNISHED, then any kind of a compromise or settlement will not placate you anyway...'
You're RIGHT !!
The Banks have Suffered Enough !!
Stop trying to Punish them !!
...Mary ....'Thanks to those of you hitting back at FDL. I was trying to think what to say & had just come up with 'moonies' of the Left!
They are often fact-free!....'
FORGET THE BANKS !!
FORGET the Radical Right !!
FDL is the REAL ENEMY !!
Jesus Christ !!
Danny on February 09, 2012 10:12 PM:
@Frisco
Chill, banks and the radical right are the big satan, FDL the small satan. I can loathe you all at the same time.
Kathryn on February 09, 2012 10:30 PM:
@this Dave.......try to see Eric Schniedermsn on Rachel Maddow Show tonight for explaination, I won't try to explain, he calls this a down payment, it's not over yet. And one more thing" this Dave", stop calling Pres. Barack Obama Barry, it 's enough to put up with the racists on the right. ( I'm not calling you a racist by the way) There is no way anybody writing comments here knows all the ins and out of this settlement (myself included) to justify flying off the handle at Obama at this point. I'm an old lady and I've never seen a president work harder and get less credit, would Bush or any of the others have wrenched a huge settlement out of BP after the oil spill, who else actually got a health care bill that covers nearly everyone after trying since Harry Truman, (it's not perfect, I know) who said he'd search for and get bin Laden and did ( thank you, seal team 6) who else saved General Motors and Chysler and did it in a smart way and so much more but it's late and I am finished.
thisdave on February 10, 2012 12:58 AM:
@Kathryn
You're right, the details haven't been fully disclosed yet. And while I do believe that Schneiderman and Harris have been fighting the good fight, I wonder about the compromises they've made in order to make peace with the administration and its re-election campaign.
I've lost all trust in the Justice Department, and the counsel it seems that Holder's been giving Obama, be it about financial institutions, habeas corpus, so on. And I'm sorely disappointed that Obama seems unable to engage the people of this country in a quest for a greater purpose than the petty, destructive and paranoid storm of social discourse engulfing the country. It's not of his making, but he seems so bound by cautious concern about political process, and the equilibrium of the big power players in Washington, that he can't break through to the people and their daily concerns.
Obama is an honorable man trying his best, and he deserves better than to be called Barry. Thanks for reminding me.