Is the $8.5 billion Foreclose and Fraud Settlement Enough of a Penalty?

by run75411

Update: Besides not prosecuting particulars who promulgated much of 2008, what makes this settlement bad is letting banks off the hook:

“In the settlement announced Monday between the Federal Reserve, the Comptroller of the Currency and ten of the largest banks and other mortgage providers, the government gives up the right to prosecute banks for past wrongful foreclosures. In exchange, the banks part with another $8.5 billion, of which $5.2 billion is for loan modifications and $3.3 billion is for people whose mortgages were wrongfully foreclosed.

It’s a pittance. With 3.8 million homeowners covered by the settlement, that works out to less than $2,000 per homeowner.” Banks Win Again”

$2,000 per homeowner in many cases might be two months of a mortgage payment. The settlement hardly qualifies as major.
Is the $8.5 billion Foreclose and Fraud Settlement Enough of a Penalty?

Are The Federal Reserve and the OCC acting in good faith in letting banks off the hook for their past predatory lending practices? Yves Smith at Naked Capitalism labels it a sellout at the expense of mortgage holders: $8.5 billion Foreclosure Fraud Settlement: Yet Another Loss for Homeowners Touted as a Victory.

When compared to TARP and other programs created to save TBTF and STBB (soon to be banks) plus the trillions pumped into the economy as a result the failures of banks and Wall Street, the $8.5 billion does seem paltry in comparison. Rather than taking the lead and closely auditing the review of wrongfully foreclosed mortgages and past practices, the OCC once again lets banks off the hook by giving them the ability to independently review both issues. Haven’t we come this way before? Banks will not do it or will be selective in what they choose to disclose. Besides the history of banks failing to act in good faith, there is also a history of government agencies and branches failure to provide consumer protection.

It appears the dogs causing much of this debacle are kicking back their hind legs in an attempt to hide the droppings left behind because of their failures. Frankly, it is amazing the OCC is still in that mode of protecting thrifts and national banks, which caused much of the issue in the last decade after they were identified as the culprits who failed to regulate. For those who may not be familiar with the OCC’s lack of supervision, I would offer Columbia’s “The Audit” as a refresher: Let Sleeping Dogs Lie.

To finalize and give strength to the OCC limited supervision (2007) of National banks and thrifts, SCOTUS over ruled states attempting to fill the void in regulating predatory bank lending practices. In a 5-3 ruling, SCOTUS tied the hands of states which attempted to regulate banks supervised by OCC. Michigan was joined by numerous states in an effort to control predatory bank lending.( Banks Win Shield From State Regulation at High Court)

A mixed bag of conservative and liberal justices ruled on Watters vs Wachovia Bank in the same manner as over turning State Usury Laws in Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp in 1978. SCOTUS cited the National Banking Act to give the OCC the capability to regulate national banks and thrifts over turn state regulations. . The irony is Congress moving quickly to repeal Glass Steagall and change the National Banking Act to allow Citibank to merge with Travelers Insurance; but, Congress saw no need to act to allow states to continue the regulation of national banks. Both actions by SCOTUS and the failure of Congress to pass new legislation have contributed much to the issues we have today. Always look to the money . . .