Last week it seemed like there was an article written every day about how close (or not) major banks were getting to a settlement with state attorney generals nation-wide.
Now it looks like we are actually delving into final settlement territory. However, the deal that’s taking shape isn’t what many people expected—they expected banks to pay their tab, walk away, and continue business as usual.
Not so. According to the Huffington Post, the $25 billion deal that’s forming only covers major banks’ offenses for robo-signing, thus leaving them open to much more litigation on the following matters:
- Criminal liability.
- Tax liability.
- Fair lending, fair housing, or any other civil rights claim.
- Federal Housing Finance Agency or the GSEs [Fannie Mae and Freddie Mac].
- CFPB claims for the period after they came into existence in July 2011.
- SEC claims.
- National Credit Union Association Claims.
- FDIC claims.
- Federal Reserve Board claims.
- MERS claims.
Rolling Stone’s Matt Taibbi, for one, was impressed. Here’s what he had to say about it in his column this weekend:
When I first heard about the foreclosure settlement, I thought it might contain a broad waiver for everything, including the tax evasion issues, the fair lending issues, securitization, and all the other things on that list above. If they did that, that would be TARPx10. My only point about this deal is that it appears to have been effectively negotiated down from a bloodcurdling outrage to whatever it is now, which is probably something far less than that: It may still be a serious underpay, but it’s not the unreal, criminal giveaway it was originally meant to be.
And it still leaves plenty of room for criminal investigation and reform. The people who organised and supervised the robosigning could and should still be targets of criminal prosecution, deal or no deal: This won’t change that.
Criminal prosecution is the kicker here, because it’s really what a lot of Americans are angry about—the economy collapsed and no one went to jail.
You can see that the Obama administration is responding to that. In this deal, the two AGs that held out the longest for harsher terms against banks were Kamala Harris of California (who rejected a “too soft” deal for her state last week that got other states thinking they would hold out too) and New York AG Eric Schneiderman.
Now Schneiderman is at the head of a Department of Justice “working group” that aims to get to the root causes of the mortgage crises, and take people to task for them. This deal, if passed, leaves him and his team of four other lawyers, plenty of room to do that.
And if they hand Obama a few wins, he’ll take those on the campaign trail with him—definitely a big deal.