By Mark Wachtler
February 10, 2012. Washington. (ONN) Without homeowners knowing it, the states and federal government have been negotiating with the nation’s largest banks over their criminal practice of foreclosing on American homeowners who were not in default, or even late on payments.
President Obama, flanked by embattled Attorney General Eric Holder, celebrates the $25 billion dollar bank settlement. Image courtesy of Current.com.
Losing everything, including their homes, for no reason other than corporate laziness and fraud, at least 750,000 American families were needlessly foreclosed on. Their state and federal governments represented the victims without their consent, resulting in yesterday’s announced settlement of an insulting $2,000 per family.
After the announcement, President Obama and 49 of the 50 state Attorneys General, celebrated the news. Eric Holder and the Justice Dept, along with the FED and HUD, were celebrating as well. Together, they pocketed $5.5 billion dollars of the settlement alleged to be the remedy for homeowners for the massive and widespread bank fraud that took place throughout the US after the housing collapse from 2008 through last year.
Reuters quoted President Obama proclaiming, “We have reached a landmark settlement with the nation's largest banks that will speed relief to the hardest hit homeowners in some of the most abusive practices of the mortgage industry and begin to turn the page on an era of recklessness that has left so much damage in its wake."
Squeezing ever more profits from their workforce, America’s biggest banks chose to foreclose on Americans en masse, rather than just on the homes that were eligible for foreclosure. The banks, like many other American industries in recent history, claim they were simply too large to insure they were following the law on each and every individual customer. In this case however, innocent people lost their homes and were thrown out on the street at the point of a Sheriff’s gun – at least 750,000 American families to be exact.
The banks and their employees devised creative methods to throw families out of their homes in large batches and then resell the houses. They're accused of practices such as “robo-signing” – having a computer sign foreclosure documents instead of a human. They are also accused of processing hundreds of thousands of foreclosure documents without ever reading them, much less checking to make sure they were accurate and legitimate.
In total, five major banks will pay a total of $25 billion dollars to homeowners, state governments and the federal government. In exchange, the government agreed to never file civil charges against the banks to recoup the homeowners’ losses in the future. The states reserved the right to seek criminal damages and individual homeowners are still free to hire their own attorneys and sue for damages in civil court. Considering it's been four years since the banking fraud was uncovered and not one single person has been put in prison, it’s highly unlikely anyone will at this point. Similarly, individual victims and their neighborhood attorneys stand little chance against corporate powerhouses like JP Morgan and Bank of America, especially when so many judges across America are financially rewarded by major corporations.
Read the article, ‘TIME Challenges Legitimacy of America’s Judicial Branch’ to see what these victims are up against.
According to Associated Press, the 25$ billion dollar settlement is the largest since the states secured a $206 billion dollar settlement with the tobacco industry in 1998. The five banks who agreed to avoid civil charges and the amount of money they’ll pay over the next three years are:
Bank of America - $8.6 billion
Wells Fargo - $4.3 billion
JP Morgan Chase - $4.2 billion
Citigroup - $1.8 billion
Ally Financial - $200 million
The government is still in negotiation with 14 other banks to possibly join the settlement. Critics argue the amounts are nothing more than a slap on the wrist. In one example, JP Morgan Chase’s penalty is roughly the same as their quarterly profit for one three-month period. Similarly, Wells Fargo made $4.1 billion last quarter on revenues of over $20 billion dollars. Some argue that’s hardly a punishment for wrongly foreclosing on three-quarters of a million American families.
Aside from the above portion of the settlement announced yesterday, there is another component as well. 1 million homeowners, of the 11 million underwater on their mortgage – meaning they owe more than their home is worth – will see a slight reduction in their monthly payments. Experts haven’t agreed on how helpful, if at all, this agreement with the nation’s banks will be for struggling homeowners.
Regarding the $2,000 award for being wrongly foreclosed on, victims are shocked and outraged.
AP talked to one former homeowner. “Two thousand dollars won't cover my moving costs," said Brian Duncan, who was evicted from his Tempe, Ariz., home last April. The news outlet also gave the government’s side of the argument. Iowa Attorney General Tom Miller, who led the 50-state talks, said, “The $2,000 checks represent the homeowners' best hope of being reimbursed for any amount. They would have had trouble winning settlements in court because of the time-consuming complexity of litigation.”
As far as the banks are concerned, they’re celebrating as well. AP reports, "It's really a wash," said Paul Miller, bank analyst at FBR Capital Markets, "A billion dollars is nothing for these large trillion-dollar banks."
Crusaders against the widespread bank fraud also criticized the settlement. The deal is "another sad example of Wall Street not being held accountable for fraud, perjury and crimes that created the greatest economic crisis since the Great Depression," said Dennis Kelleher, CEO of Better Markets, a group that advocates stricter financial regulation, "The math does not add up in a massive 'robo-signing' scandal that is nothing more than systemic criminal conduct."
In case anyone’s wondering, the one state that did not participate in the agreement was Oklahoma. That state settled separately with the same 5 banks for $18.6 million. That amount pales in comparison to the total settlement of $25 billion. But it’s in line with other states considering that three-quarters of the total settlement will go to the two states of California and Florida. Explaining that California’s Attorney General held out for extra compensation, roughly half of the total award will go to California, while approximately a quarter will go to Florida.
In the final analysis, the banks are the big winners once again, while the American homeowner is the big loser. These unsuspecting American families had their homes stolen from them and all they get is a lousy $2,000 check. The banks on the other hand, get off paying a couple billion dollars – the equivalent of one quarter’s profits. Even more valuable, the states’ Attorneys General all agreed never to sue the banks over the crimes in the future, or sue them on behalf of homeowners within their state. If each state sued, the banks would be on the hook for hundreds of billions of dollars. If all 750,000 victims had the ability to sue, the damages would top $1 trillion.
Not a bad day for America’s biggest banks.