The Bizarre Mortgage “Settlement” Negotiations

Full Story here: The Bizarre Mortgage “Settlement” Negotiations 1. There has not been anything even remotely resembling an investigation. As we have said earlier, the eight week Federal exam was a joke. As Adam Levitin noted: …we don’t actually have a tally of servicer malfeasance. Neither the AGs nor the federal regulators have done the sort of investigation necessary to really know the full extent of servicer wrong-doings. Servicers might downplay the harms, but we just don’t know. This isn’t just robosigning. The banks forfeited their ability to make the “trust me” argument some point in fall of 2008. How can you possibly settle when you don’t know the extent of the abuses? Yes, I know this is intended to be a whitewash, but in the stress tests, the Administration engaged in a lot of persuasive-looking theatrics to somewhat disguise the fact that the end result was pre-determined. This time, they aren’t even bothering to make the cover-up look credible. This is yet another sign of how the banks are effectively beyond the reach of the law. 2. The fact that the AGs and the Federal regulators have joined forces is another sign that no one has the guts to administer anything more than a slap on the wrist relative to the damage done. I should have realized Tom Miller, the Iowa AG who is acting as the leader of the AG effort, when he spoke warmly of the cooperation he was getting from Treasury in Congressional hearing last November. The state and Federal issues are very different. It is one thing to coordinate, another to combine forces. The reason a joint effort is less powerful is that each group has the ability independently to do considerable damage to the banks. An effort with participants this disparate (the 50 AGs already have divisions within the group as to how tough to be on the banks, as do the Federal regulators) almost assures lowest common denominator, meaning less ambitious, demands. 3. The latest sign of the weak stance being taken by the supposed enforcers is that they have offered an outline of standards separate from an economic deal. Make big money in penny stocks today