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The $25B deal between 49 state Attorneys General (Oklahoma the hold out) and 5 mortgage banks (Ally Financial, Bank of America, Citigroup, Wells Fargo and JP Morgan) has officially been brokered.  Sounds like a lot of money, right?  I won’t bore you with too many details, but it is a big time gift to these banks that were looking at hundreds of billions of dollars in exposure to litigation over massive mortgage fraud.  The deal immunizes these banks immediately from such state and federal litigation, while the banks have to hold up their end of the bargain sometime in the next 3 years.

-Questions also remain over how many people will benefit from the settlement. Roughly 20 percent of Americans with a mortgage owe more on their properties than they are worth. “The deal announced today is too small,” said the Pico National Network, a grass-roots organization that deals with housing issues, in a statement. “It falls far short of providing real justice for homeowners and American families. The estimated $17 billion for principal reduction is a small drop in a big bucket in comparison to $700 billion in total negative equity.”  

-Matt Taibbi wrote a regretful piece today about the deal because he was recently optimistic about it.  However, now that the settlement is finalized, and I’ve had time to think about it and talk to people who know far more than I do about this, I’m feeling pretty queasy.

-The best analysis you can find is by Yves Smith, who was less surprised at how bad the deal was.  I highly suggest reading her piece in its entirety, but I’ll give you a couple highlights.

That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors…

The enforcement is a joke. The first layer of supervision is the banks reporting on themselves…

We’ll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities.
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Over the last 40 years, we have seen retroactive immunity extended to felons and war criminals in the White House, to banks that illegally combined commercial with investment banking, telecoms that took part in illegal government spy programs, and now mortgage bankers.  The message is loud and clear, if you commit felonies and frauds on a big enough scale, you can simply have the law and/or enforcement watered down.