Gretchen Morgenson yet again brings attention to a case of Main Street getting the short end of the stick. She was sanguine in her appraisal. In case you forgot, this was the case where banks flagrantly failed to comply with the most basic requirements governing mortgage foreclosures:
If you thought this was the deal that would hold banks accountable for filing phony documents in courts, foreclosing without showing they had the legal right to do so and generally running roughshod over anyone who opposed them, you are likely to be disappointed.
Though no details are official, Morgenson reports that banks will only be on the hook for $5 billion in cash reimbursements. (The remaining $20 billion would come in the form of credits to existing mortgages, which could end up benefiting the banks in the long run.) Roughly $1,500 would be paid to each debtor who lost his or her home.
First, I know settlements are the product of tough negotiations, but this is frankly an insult. The States and feds had far more leverage to achieve a much stronger result. Significantly and inexplicably, the relief fails to differentiate between rightful and wrongful foreclosures, meaning many of the recipients would get money for nothing—even more insulting to the victimized families.
Moreover, the $5 billion cash settlement represents nothing more than a slap on the wrist to the big banks. Throwing a $50 parking ticket on the Rolls Royce parked in front of the fire hydrant isn’t exactly going to change its owner’s parking habits. But tow the thing, maybe put a few scrapes on its side, and suspend the driver’s license for 90 days. You can bet it won’t be parked there again.
$5 billion—split among a dozen institutions—is a mere parking ticket. Consumers need more than money. They need a fundamental shift in the way banks do business. Banning executives from the industry, imposing suspensions on others, taking licenses away from banks themselves and dare I say sending a few people to jail, it should all be considered.
It is popular to repeat Cuba Gooding Jr’s scream in the movie Jerry Maguire: “Show me the money!” But sometimes—and this is one of those times—it is not about the money.
Assisted by David Martin