Foreclosure fraud settlement: Victims get $5B, banks get $20B to cover expenses from the taxpayer
After months of wrangling, the long-awaited foreclosure settlement between the government and the banks appears to be at hand.
A $26 billion settlement was announced Thursday morning between the federal government, state attorneys general and the five biggest banks in the mortgage market: Ally Financial (the old GE Capital), Bank of America, Wells Fargo, JP Morgan and Citigroup.
The settlement is being hailed as the biggest multi-state settlement since the 1998 tobacco agreement. But as Henry and I note in the accompanying video, the settlement is too small to really help the housing market, or even do much for individual victims of fraud and abuse. The deal may, in fact, hurt housing by sending a message to people who've stayed current on their mortgages that irresponsible behavior is what gets rewarded in America. That, presumably, is not the intention of policymakers but the "moral hazard" fallout from the settlement. More Americans may "walk away" from uneconomic loans, which will put additional pressure on local housing markets.
Furthermore, several experts note that for all the rhetoric about punishing corporate crimes and helping victims of abuse, the banks have once again gotten away with a slap on the wrist and may end up benefiting most of all from the settlement.
http://finance.yahoo.com/blogs/daily-ticker/26b-mortgage-settlement-good-banks-not-good-homeowners-154031911.html
(20+5 = 26. We already know where that extra billion is going.)
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