National Mortgage Settlement Update
A friend asked me yesterday where we stood on the national mortgage settlement, so I thought I would revisit the subject for an update. I had written a number of articles earlier in the year outlining the various gifts bestowed on banks under the terms of the mortgage settlement, namely release of liability for a host of illegal activities and credits for things the banks would have done anyway when their hands were eventually forced by the market. Naked Capitalism provided a nice summary of the mortgage settlement back in February.
Subsequent reports indicate that settlement money provided to the states ($2.5 billion) which was intended to address problems in the housing sector has in many cases been allocated for other uses. In Texas, $125 million went straight to the general fund, while the remaining $10 million went to the judicial fund. Enterprise Community Partners provides a nice break down of how states have allocated their mortgage settlement money. It's interesting to see that some people have recently challenged the "discretionary use" stance taken by their state leaders.
A visit to the National Mortgage Settlement website is like pulling out your dusty old music collection. No news, updates or anything of the sort to lead you to believe that a real mortgage fraud task force is trying with any effort to bring the crooks to bear. A visit to the Financial Fraud Enforcement Task Force site does show a scrolling list of essentially low level cases they're working on. Interestingly, the Residential Mortgage Backed Securities Working Group is still "collaborating" as of the latest press release dated January 27th. The link to the news section leads to a nice list of more low-level, bit players. Let me give you an example:
According to the filing, here's what she did:
“This defendant preyed upon the elderly and other vulnerable people, deceived them into believing their investments with her were safe, insured and guaranteed, and then stole almost two million dollars of their hard-earned savings,” stated U.S. Attorney Fein. “Hopefully, this lengthy sentence will serve as a warning to all would-be fraudsters and a reminder to the investing public to be vigilant before entrusting their life savings to so-called investment advisors. You should research your investment advisors and verify the information you are provided. I commend Connecticut’s Department of Banking for initiating this investigation, and the U.S. Postal Inspection Service, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the FBI for pursuing it thoroughly to secure justice. I applaud the victims who appeared in court today and told the court about the fraud and the painful ways in which it has affected their lives.”
Now let that sink in for a minute, 8 years in federal prison for a $2 million fraud. If that punishment is befitting of the activity involved, I wonder what kind of time someone should do if they stole say, $1.6 billion in customers' invested, segregated accounts? What about selling $billions of virtually worthless mortgage derivatives to your clients which you advertise as triple A securities and then betting $2 billion on the failure of those same investments?
The latest news with the mortgage settlement is that it's more of the same two-tiered justice we are witnessing in America. While promising hope and change, and maybe some accountability for those who have committed crimes, what we have instead is a Justice Department, Treasury and Federal Reserve who have "foamed the runway" for big Wall Street banks. Neil Barofsky, former TARP Inspector General, has gone on the record to describe how the Treasury Secretary viewed the housing crisis. You can read about his experiences working with the current Administration in his new book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street. Charles Ferguson, who gave us the fabulous documentary Inside Job, and his new book, Predator Nation, summed up the strategy underpinning current government policy: Let Them Eat Task Forces. This is what the mortgage settlement is all about, kicking the can down the road with little real action while you let the clock run out. The mortgage settlement was nothing more than political theatre with a healthy dose of bank stimulus rolled in, just in time for the November elections of course.
Don't get your hopes up about any significant progress resulting from the national mortgage settlement or the FFETF, because there will be none. Much like the TARP bailout, the mortgage settlement provides virtually no accountability measures for the banks. If you want to find out how serious our current government is about mortgage fraud, we can look at the $trillions of mortgage-back derivatives which were shuffled around the global casino while the house was burning down. Not one of the dealers have spent a day in jail for their role in the fraud fest and financial collapse. That should tell you everything you need to know. Contrast that with the tenacity with which the government prosecuted and incacerated Charlie Engle for taking out a stated income loan.
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* This article was originally published at Aaron Layman Properties.