Goldman Sachs and Morgan Stanley will pay a combined $557 million to settle federal complaints that they wrongfully foreclosed on homeowners who should have been allowed to stay in their homes.
The agreements announced Wednesday, Jan. 9, with the Federal Reserve were similar to deals struck earlier this month with 10 other major banks and mortgage lenders. Combined, the 12 firms will pay more than $9 billion.
The settlements could compensate hundreds of thousands of Americans whose homes were seized because of abuses such as “robo-signing” — when banks automatically signed off on foreclosures without properly reviewing documents or actually owning the properties.
Under the settlement, Goldman and Morgan Stanley will pay $232 million in cash compensation to homeowners to end an independent review of loan files required under a 2011 action by the Fed and the Office of the Comptroller of the Currency. The remaining $325 million will be used to reduce mortgage balances and to forgive outstanding principal on home sales that generated less than borrowers owed on their mortgages.
About 220,000 people whose homes were in foreclosure in 2009 and 2010 are eligible for payments under the deal with the two banks according to the Fed. The payments could range from hundreds of dollars up to $125,000, depending on the type of possible error.
Yet to anyone who understands the egregiousness of the crime, this is merely a slap on the wrist; anyone who comprehends the vast wealth held by these entities knows that this is merely a drop in the bucket.
CSI Wall Street
Foreclosure relief was originally written into the TARP statute as a primary function of the original bailouts. There it stands in section 109 of the law that TARP was supposed to provide a massive program of foreclosure relief, but, for some reason, they never got around to it. And the only bailout program that ever provided any foreclosure relief was HAMP (Home Affordable Modification Program), which, to date, only spent about $3 billion-$4 billion out of all the bailout on that program. Now, through litigation, there are settlements that are starting to trickle in, but now it’s a case of too little, too late.
Contrast that with what happened at the beginning of the bailout, where the banks and the financial companies were instantly handed hundreds of billions, trillions of dollars of relief and the dichotomy is important to recognize, that the relief for ordinary people is still coming slowly and insufficiently years later, whereas relief for Wall Street came instantaneously and was excessive.
The robo-signing that these firms were found guilty of essentially means they were systematically lying to the tune, typically, of the large places, of 10,000 times a month. So over 100,000 times a year, firms such as Morgan Stanley, Goldman Sachs and the like, were committing felonies that led to people being homeless in America, in many cases.
Approximately $3.3 billion will go to 3.8 million homeowners to end the review of foreclosures. Yet, that works out to less than $1,000 per victim. This an extremely small price to pay, given the seriousness of the offenses — even evicting people from homes that they didn’t even legally own at the time.
Looky Lew: Treasury nominee’s fingerprints all over Wall Street deregulation
As the Office of Management and Budget head for President Clinton, Jack Lew presided over one the darkest moments in American economic history. The Clinton administration, along with Greenspan, in league with Phil Gramm, and with one of the important architects of all of this being Jack Lew, helps to pass the Commodity Futures Modernization Act, which said, basically, we withdraw all regulatory powers to protect the nation from Wall Street and Corporate America … period.
From the federal government, from the state and local governments, firms were exempted from laws that prevented Wall Street from gambling with shareholders money. They were exempted from the boiler room laws that prevented fraudulent operations — boiler room refers to an outbound call center selling questionable investments by telephone.
So, Lew is the guy who helped design the disaster of 2008, participated in the disaster on Wall Street and was made rich by it. What hasn’t been talked about is his work at Citicorp. In June 2006, Lew was named chief operating officer of Citigroup’s Alternative Investments unit, a proprietary trading group. The unit he oversaw invested in a hedge fund “that bet on the housing market to collapse.”
So the fact remains that he got a huge bonus via the bailout at Citicorp from the U.S. government. He helps to produces the disaster, profits from the disaster and is paid bonuses as result of the disaster. This, ladies and gentleman, is the man President Obama proposes to hand over the combination to the nation’s vault to.
Not guilty by reason of insolvency
Neil Barofsky, the bailout inspector, said the “original sin” of the bailout, was the moment in time where, right after TARP was passed, the government elected to call companies that were unhealthy and insolvent “healthy” and “solvent.” When they scrapped the plan to buy up troubled assets, let’s remember, TARP was the Troubled Asset Relief Program. Well, just a few days after the bill was passed they abandoned the idea of troubled asset relief and decided to just dump a whole bunch of money onto the balance sheets of these banks. This was called the Capital Purchase Program.
They spent $125 billion right off the bat. It was spent on nine companies and one of the things they created was the fiction that all of these companies were healthy and viable. It turned out later, according to numerous sources, that they didn’t even check to see if these companies were solvent at the time. They had no interest in discovering that, one way or the other. Many of these companies were on the brink of failure at the time. Barofsky was told specifically that Morgan Stanley and Goldman Sachs were both on the brink of disaster when they were given this money.
Yet, they retain their wealth and their power; they still can make great demands on our elected officials and be taken seriously. They can ask and receive an audience with policymakers that only occur in the common citizen’s dreams. They are society’s cherished repeat-offenders; our nation’s fabulous felons.
According to a 2011 report from Center for Economic and Policy Research (CEPR), non-violent offenders make up over 60 percent of the prison and jail population in the United States. And yet we still wait for one high-profile CEO or heavy hitter in the financial sector to get anything more than a pittance of a fine and a line of credit with the Federal Reserve.
When it comes to the financial sector, penalties for those accused of fraud or other misconduct would be measured in dollars, not jail terms. This does nothing to disabuse the wealthy and the powerful that money can buy anything, even legitimacy when criminal charges would be more appropriate.
For all the talk about President Obama being an enemy of the free-market, Wall Street and Big Business, his administration’s track record is abhorrently unproductive in bringing corporate law breakers to justice. The Daily Bail in a piece from November of last year points out that Clinton’s DOJ prosecuted over 1,800 S&L (savings and loans) executives, senior officials and directors, and over 1,000 of them were sent to jail.
Between 2002 and 2008, even a Bush administration task force “obtained over 1,300 corporate fraud convictions, including those of over 130 corporate vice presidents and over 200 CEOs and corporate presidents.”
How many high-level Wall Street executives has the Obama administration garnered convictions against? Zero. The greatest theft of wealth in the history of the world was exposed in 2008 and not only did we not arrest the robbers, we repeatedly gave them a rewards for robbing us.
To paraphrase the title of a recent book, I guess the best way to rob a bank … is to own one.