The nation’s top banks are tired of paying the price for crashing the economy, defrauding billions from retirement savings, and dispossessing tens of millions of people from their homes in fraudulent foreclosures across the nation. The banks are ready to move on already. Their officers and representatives are whining about the continued investigations, lawsuits, and damage to their reputation. If the banks are tired of fending off lawsuits, how must millions of Americans facing debt collection, foreclosure, or student loan collection lawsuits feel?
In February 2012, a foreclosure fraud settlement was reached between five of the top banks; Citi, Wells, BoA, Chase, and Ally/GMAC. The settlement, between these top five banks and forty-nine state attorneys general and federal housing and banking regulators, was the result of sixteen months of negotiations after the story about foreclosure fraud and robosigning (aka forgery and real estate fraud) broke in the mainstream media. What specific acts of wrongdoing were settled, thereby removing the threat of future demands, settlements, or government lawsuits? According to a FAQ document on the settlement published by HUD on March 12, 2012:
Q: What set of violations are servicers being released from?
A: The release of claims relinquishes particular state and federal claims on issues addressed by the settlement. These claims at the state level pertain to violations of servicer misconduct, such as robo-signing and other foreclosure misconduct. At the federal level, these claims include failure to abide by FHA servicing requirements and a limited origination claim release.
The release is narrowly tailored and is limited to mortgage servicing and origination claims. States and federal parties that sign on may still pursue other claims against the banks, such as securities and securitization claims. We also retain the ability to pursue financial institutions that are not part of the settlement.
Despite the banks’ grandstanding, the liability waived in the settlement does not absolve the five defendant banks from accountability for other fraudulent acts. The settlement amount of $25 billion to be split between the five banks is paltry when compared to the damage done by the wrongdoing. Much of the $25 billion can be “paid” by earning “credits” by doing short sales or offering cash-for-keys.
One of the banks which did not sign on to this settlement, Wells Fargo, was sued last week by the Manhattan US Attorney for defrauding the Federal Housing Authority (FHA). This lawsuit is based on a specific type of FHA lender mortgage insurance fraud and is only for damages of $190 million, a miniscule fraction of harm done. The federal government’s lawsuit slams Wells for originating thousands of fraudulent, predatory FHA loans, then falsely certified to the FHA that the loans were of good quality in order to collect FHA default insurance once the loans inevitably stopped performing.
In a separate case announced last week with much media fanfare, NY Attorney General, Eric Schneiderman, sued Bear Stearns/JP Morgan Chase for massive investment fraud that defrauded billions out of pension funds and other investments. The lawsuit reads like an aging starlet trying desperately trying to hang on to her fading beauty. Firedoglake.com blogger David Dayen critiques the case, “there seem to be no new evidence or investigations or legal theories in this case” and “Overall, this looks like a belated PR effort, dumped before the election, to reinforce a new get-tough attitude against the big banks.” JPMorgan is fighting back against those charges. Chief Executive Jamie Dimon lashed out this week in Washington at a public event, saying his bank has already paid its price. It took on up to $10 billion in losses related to Bear Stearns for doing the Federal Reserve “a favor.”
The American people are becoming more and more educated about the bank fraud that caused financial crisis and the foreclosure fraud epidemic. As this happens, the people are becoming more vocal and outraged about the refusal of law enforcement, regulators, elected officials, and judges to prosecute and hold the financial industry accountable.
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