Yesterday's settlement with Wall Street, A BAD DEAL from CREDO & Settlement launches foreclosure reckoning from WASHINGTON POST 10FEB12

THE only good part of this deal is that wall street executives, directors of the financial-banking industry cabal, could still face criminal charges for their actions that caused the recession. Thanks to several strong, honest, progressive state AGs there is still a chance for justice. This from Credo, followed by an article on the deal from the Washington Post.....

A bad deal Wall Street banks fraudulently and illegally foreclose on your house. You get $2,000. The bank gets let off the hook. We'd call that a bad deal. And yet yesterday, at the urging of the White House, federal regulators along with 49 state attorneys general announced a settlement deal for mortgage servicer abuse that does essentially that. It lets banks off the hook for widespread foreclosure fraud. Press releases have trumpeted a $26 billion deal which may sound like a lot, but it's a paltry sum when you break down the numbers. With an average mortgage of $180,000, and loan instruments executed illegally, a family that lost their home will get a check for just over 1% of the value of the mortgage.1 That is not a victory. The amount of money this deal makes available to help homeowners is an order of magnitude too small and incommensurate with the harm done by the banks. The estimated $10-$20 billion in the deal for principal reduction would reduce only about 2% of the $700 billion in equity destroyed during the financial crisis. And the banks themselves will only pay $5 billion out of their own pocket. By far the lion's share of the cost will be borne by investors and taxpayers, who had no part in the robo-signing scandal. 2 No doubt the deal is far better than the deal that was offered months ago. And this most certainly is a result of activism from members of CREDO and many of our allies in the progressive movement who worked with progressive attorneys general like New York's Eric Schneiderman, California's Kamala Harris, Delaware's Beau Biden, Massachusetts' Martha Coakley and Nevada's Catherine Cortez Masto to fight a bad deal. But the final deal, while better, still can't be characterized as a good deal or even as a good first step towards real accountability for Wall Street banks. The reported $26 billion settlement will not come close to inflicting any real pain on the banks all of which have already reserved the full amounts required from them under the deal. As Robert Reich said, the "$26 billion settlement with banks over mortgage fraud is far short of what they should pay and distressed home owners deserve."3 One in five Americans with mortgages owe the banks more than their homes are worth, and these home owners are underwater by an average of $50,000 each. This is a collective negative equity of nearly $700 billion.4 Consider the $700 billion bailout of Wall Street paid for by U.S. taxpayers5 and the more than $1.2 trillion in loans6 provided by the Federal Reserve to Wall Street banks. Or another way to put the deal in perspective is to compare it to the tobacco industry settlement in 1998 — the largest previous multi-state agreement. That deal was worth $350 billion in today's dollars — more than ten times the size of the mortgage deal.7 And that's not even all that's wrong with this deal. The federal government's track record for enforcing settlement terms with Wall Street banks is abysmal. Furthermore, even if the banks follow the terms of the deal, it's quite possible than when all is said and done, not only will the banks have suffered no pain, they may actually come out having profited from their illegal schemes to rip off homeowners. According to the Consumer Financial Protection Bureau, the largest mortgage banks saved $20 billion by taking illegal shortcuts — an amount far greater than the $5 billion out of pocket they will be required to pay in this deal.8 All of which adds up to a scenario in which this settlement does literally nothing to deter the banks from engaging in the same fraudulent behavior in the future. Senator Dick Durbin famously said the Wall Street banks own the politicians in Washington, DC. Today, this could not be more clearly true as we closely examine the deal that the Obama administration cut with Wall Street and pressured state attorneys general to sign. There has yet to be a full investigation of the robo-signing scandal despite what Reuters called "copious evidence" of "widespread forgery, perjury, obstruction of justice, and illegal foreclosures...." 9 By establishing settlement terms before there has been any meaningful investigation, the deal whitewashes the widespread lawlessness of the banks and virtually ensures that no bankers will be held criminally responsible for their part in the robo-signing scandal and foreclosure fraud. Though the exact terms of the settlement have not been disclosed, we understand that it will not cut off other important avenues to hold the banks accountable. New York Attorney General Eric Schneiderman is co-chairing a federal task force that if fully resourced and left to operate unhindered by the White House could achieve hundreds of billions in reduced principal for underwater homeowners and criminal indictments for bankers who broke the law and helped drive our economy off a cliff. And other state attorneys general can continue investigating Wall Street's role in causing the housing crisis to ensure that the banks that caused the crisis are held accountable for their wrongdoing. This is the biggest case of fraud in our history. Homeowners deserve justice for crimes committed against them by Wall Street banks that in many cases literally stole their homes from underneath them. Unfortunately, yesterday's settlement doesn't even provide anything close to a down payment on justice. As the election season heats up, we must be insistent about real accountability for Wall Street crooks. Pressure from activists like us will be even more important in the days to come if we are to achieve any real measure of accountability for Wall Street bankers who profited from their crimes and left the 99% to pay to the price for their reckless disregard. Becky Bond, Political Director CREDO Action from Working Assets 1. "The Top Twelve Reasons Why You Should Hate the Mortgage Settlement," Yves Smith, Naked Capitalism, 02-09-12 2. "The Servicing Settlement: Banks 1, Public 0," Adam Levitin, Credit Slips, 02-09-12 3. Twitter, 02-09-12 4. "Mortgage Plan Gives Homeowners Bulk of the Benefits," Nelson D. Schwatz and Shaila Dewan, New York Times, 02-09-12 5. "Wall Street Aristocracy Got $1.2 Trillion in Secret Loans," Bradley Keoun and Phil Kuntz, Bloomberg, 08-22-11 6. "The Wall Street Bailout Plan Explained ," David Stout, New York Times, 09-20-08 7. "FAQ: The foreclosure settlement ," Sarah Halzack and Sarah Kliff, WashingtonPost.com, 02-09-12 8. "Big Banks Save Billions As Homeowners Suffer, Internal Federal Report By CFPB Finds," Huffington Post, 03-28-11. 9. "U.S. AG Eric Holder, DoJ Head Lanny Breuer Linked To Banks Accused Of Foreclosure Fraud ," Reuters, 01-19-12. Share on Facebook Post to your wall Tweet this Post to Twitter

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Settlement launches foreclosure reckoning

By Brady Dennis and Sari Horwitz

The government’s $25 billion settlement Thursday with banks over fraudulent foreclosure practices begins a long-promised reckoning with the financial industry over its role in the worst economic crisis since the Great Depression, officials said.
The deal represents the largest industry settlement since an agreement with tobacco companies in 1998 and will force five of the nation’s largest banks to overhaul their mortgage-servicing practices and reduce loan balances for many borrowers who owe more than their houses are worth.
FAQ: The foreclosure settlement
Officials acknowledged that the final sum will reach only a fraction of homeowners across the country whose homes are collectively worth $750 billion less than what is owed on their mortgages. But they argued that it was a meaningful step in healing the housing market.
The priority of the settlement was not to punish banks, officials said. Another wave of punishment is on its way, they vowed.
“This is neither the beginning nor the end of our work to hold banks and other institutions accountable for the destruction they’ve caused families, communities and country,” said Illinois Attorney General Lisa Madigan. “Today’s settlement should serve as a warning.”
The deal was brought on by revelations that banks were using forged and shoddy paperwork to foreclose rapidly on struggling homeowners, a practice known as “robo-signing.” Outrage over those practices led to 16 months of settlement talks between state and federal officials and five large banks.
The officials who crafted Thursday’s settlement were careful to leave the door open to a wide range of future litigation, despite efforts by banks to shield themselves from such legal actions. It allows for future actions over fair-housing and fair-lending violations, as well as civil rights claims. It doesn’t bar individuals from joining class-action lawsuits. Nor does it limit the lawsuits that private investors can file in search of damages, some of which have already been launched.
That means the legal hangover from the mortgage bubble is probably far from over for many of the country’s largest banks.
Last September, federal regulators launched a broad legal assault on 17 big banks, claiming they sold nearly $200 billion in fraudulent mortgage investments to housing giants Fannie Mae and Freddie Mac.
Since then, as the housing slump has continued to weigh down the larger economy and movements as disparate as the tea party and Occupy Wall Street have raged against the lack of accountability for the crisis, the pressure for regulators to hold individuals and institutions accountable has only grown.
New investigative unit
President Obama announced in his recent State of the Union address a new unit that would would “expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.” Days later, Attorney General Eric H. Holder Jr. said the Justice Department had issued civil subpoenas to 11 financial institutions.
Helping to lead the new investigative unit is New York Attorney General Eric Schneiderman, who for months had been critical of the foreclosure settlement because of concerns that it might prevent deeper investigations into mortgage misdeeds and could let banks off too easily.
Schneiderman, who ultimately signed on to Thursday’s settlement, last week filed lawsuits against several banks, claiming that they deceived homeowners and court officials by filing bogus documents through a popular electronic mortgage registry. He and his counterparts from states such as California, Delaware, Massachusetts and Nevada have vowed to press forward with their inquiries — an approach that has been cheered by liberal groups and consumer advocates.
Separately, the Securities and Exchange Commission is examining whether banks fully disclosed the risks to investors who bought packages of loans that financed the housing boom. The agency has continued digging for evidence that firms failed to disclose important information when selling the securities to investors, SEC enforcement director Robert Khuzami said recently. The SEC also has sent banks a flurry of requests for documents and interviews with witnesses.
Goldman Sachs settled an SEC complaint for $550 million in 2010, but its last quarterly report — like those of other banks — describes a variety of pending lawsuits and government investigations that the firm faces. “There remains significant uncertainty surrounding the nature and extent of any exposure for participants in this market,” Goldman said in the report.
The passage of time since the housing crash first hit could affect the government’s ability to impose penalties on financial firms. Generally speaking, under a statute of limitations, the SEC can only obtain penalties for fraud within the past five years. But the SEC and other agencies could argue that the clock didn’t start ticking until it was apparent that fraud occurred.
Thursday’s settlement, which would require a judge’s consent, won approval from 49 states. Oklahoma was the lone holdout.
Under the terms of the deal, banks would have three years to complete principal writedowns, refinancings and other relief. It provides incentives for actions taken within the first 12 months so that the aid can get to homeowners sooner rather than later.
The settlement also includes about $17 billion that would go toward foreclosure-prevention measures, such as lowering the loan balance for borrowers who owe more than their homes are worth. Other provisions would provide for lowering interest rates for homeowners who are current on their loans. In addition, as many as 750,000 borrowers who lost their homes to foreclosure since 2008 would be eligible for payouts of about $2,000 each.
The five banks at the heart of the settlement are Wells Fargo, Bank of America, J.P. Morgan Chase, Ally Financial and Citigroup. Ultimately, the amount of aid to homeowners could reach $40 billion, officials said, adding that they hope other banks will soon sign similar agreements and adopt the new standards set out by the deal.
Consumer impact uncertain
Several Washington area housing counselors said the deal would probably do little to help their clients but that they needed to learn the details of the aid to be sure.
Cherelle Silue, manager of housing services at United Communities Against Poverty in Prince George’s County, said her first impression is that a homeowner could wind up not getting much.
For homeowners who are trying to catch up on their mortgages, “we are talking thousands and thousands of dollars,” Silue said. “I am sure that it is going to be able to help someone, but I am not sure how many.”
In any case, the celebrations among state and government officials over a significant settlement for homeowners on Thursday included numerous reminders that the victory marked a beginning rather than an ending.
“This settlement also protects our ability to further investigate the practices that caused this mess. And this is important,” Obama said at White House, adding: “We’re going to keep at it until we hold those who broke the law fully accountable.”

Staff writers David S. Hilzenrath, Sarah Kliff, Luz Lazo and Jeremy Borden contributed to this report.