The Obama Justice Department vs Big Five Banks Settlement is Actually a Payoff for Services Rendered

by Scott Creighton

Keep this information in mind as you read the following article: The largest banks made a combined 13 billion dollars in profits from 7.77 trillion dollars of undisclosed emergency loans from the Federal Reserve bank over and above the 780 billion dollar banker bailouts. The loans and the bailouts were a direct reaction to the crisis caused by the criminal and fraudulent behavior of these same banks which the Obama administration now says will cost them roughly 1 billion a piece. 13 billion in profits for criminal activities (that we know of) and 5 billion in penalties (spread out over the course of a few years) while it is left to investors to foot the bill for the rest of the 26 billion dollar “settlement” deal. No further criminal prosecution, no further investigation required.

From Bloomberg News Nov. 2011 -

• The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed… JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley
• Bank of America and New York-based Citigroup each received $45 billion from TARP.
• Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.
• Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data.
• Bank of America took over Merrill Lynch & Co. at the urging of then-Treasury Secretary Paulson after buying the biggest U.S. home lender, Countrywide Financial Corp.
• Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition.
• JPMorgan absorbed the country’s largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The New York Fed, then headed by Timothy F. Geithner, who’s now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time.

original article below

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The Obama administration finalized their latest and most heinous betrayals of their 3 year history yesterday when they announced their settlement between the big five banks and state and federal governments on their “investigation” into the massive systemic mortgage fraud conspiracy. There will be no investigation. We will never know the full extent of the criminal conspiracy to decimate the economy of the United States of America because Barack Obama’s “Justice” Department has struck a deal. The economic hit-men who are running this country won out as Left Cover Obama sold us out. Again.

The Big Five Banks, JPMorgan Chase, Wells Fargo, Citigroup, Bank of America (which bought mortgage firm Countrywide), and Ally Financial Inc. (formerly GMAC, the financial arm of General Motors) are more than let off the hook on this deal – they will actually profit from it. The price tag being roundly promoted by the MSM is around 25 billion dollars split by the big 5 banks, but actually they are only on the hook for 5 billion of that spread out over the course of the next few years.

The people will pay the rest.

Homeowners who lost their homes (average value of the homes = $180,000) due to fraudulent paperwork by these banks will receive a paltry $2,000. No homeowner who lost their home due to fraudulent documents submitted to the courts by the big 5 banks, will get their homes back.

Let me repeat that: no homeowner will get their homes back in spite of the fact that the banks knowingly submitted falsified documents to the courts.

The banks made a reported 46 billion in profits last year alone.

Aside from that, the so-called “protections” written into this settlement which are being touted as providing protections from this sort of thing happening to us again, are anything but. The fact is, the first level of defense in this agreement… is the banks themselves. THEY are going to “self regulate” and any questionable practices that are to be brought up to the second level of defense, must first be submitted BY THE BANKS THEMSELVES.

Obama has now codified all of the crimes of the previous administrations: Premeditated Murder, the Endless War on Terror, War Crimes, Crimes Against Humanity, Torture, Rendition, Warrant-less Wiretaps, the Decimation of the Constitution of the United States, the Banker Bailouts, the Looting of our Treasury (7.7 trillion dollars over and above the Banker Bailouts according to Bloomberg News), and now finally, the sub-Prime Mortgage Destabilization Plan that has brought us to this horrific precipice where we are looking into the abyss of the neoliberalization of our country.

Here are a few things that have been written about this latest betrayal of the “CHANGE” administration (notice that these are all from “liberal” or left wing sources).

From the Huffington Post:

1. We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.

2. That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors.

5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. The framework is similar to that of the OCC consent decrees implemented last year, which Adam Levitin and yours truly, among others, decried as regulatory theater.

12. We’ll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. But the problems will fester and the housing market will continue to suffer. Investors in mortgage-backed securities, who know that services have been screwing them for years, will be hung out to dry and will likely never return to a private MBS market, since the problems won’t ever be fixed. This settlement has not only revealed the residential mortgage market to be too big to fail, but puts it on long term, perhaps permanent, government life support. Yves Smith

And from Firedoglake:

The robo-signing is the smoking gun that is the key to proving every other part of this criminal conspiracy, which is why the banks had to have robo-singing immunized.

So, homeowners are screwed.

Yet that is not the end of the harm that this deal does to the public. The principal write downs in question are not being funded by the banks. No, they will be funded out from under the bond holders. Well, not ALL the bond holders.

Remember the bailout? And the creation of the “bad banks” to hold the toxic assets? Maiden Lane 1 and Maiden Lane 2? The banks already got bailed out for the RMBS they held themselves. Also, the RMBS held by Fannie and Freddie (about ½ of all mortgages in the US) are not covered in this deal. So, whose bonds are covered?

The bonds held by pension funds, municipalities, hedge funds, and even in the portfolios of individual investors. Yep, John Q. Public is raped at both ends of this deal.

This is the worst of outcomes. You will lose your house and then see your retirement gutted. Cynthia Kouril

Finally, from the World Socialist Web Site:

In exchange for the settlement, the banks will be released from liability for fraudulent and likely criminal activities. This includes “robo-signing,” in which the banks had employees sign hundreds of thousands of legal foreclosure documents without any knowledge of the underlying mortgages. Banks were also involved in forging documents. The true extent of the illegal operations is not known, and keeping this information secret is one of the aims of the settlement.

Evidence of these actions first emerged in 2010. States launched investigations in response, and the Obama administration stepped in to package these investigations and lead them to a settlement favorable to the banks. Over the past several weeks, the administration has placed heavy pressure on several state holdouts to sign on to the deal.

Of particular importance for Bank of America is the fact that the settlement will end a lawsuit filed by Nevada and Arizona over allegations that the bank has been deceiving homeowners seeking to participate in a refinancing program.

Only about $5 billion of the settlement will take the form of direct payments, including, according to government officials, a payment of about $2,000 to some individuals who had their homes foreclosed between September 2008 and December 2011.

Despite the evidence of fraud, no one will get their home back. Since 2007, there have been some 4 million home foreclosures.

About $17 billion will come from the modification of existing loans, spaced over a three-year time period. Details are still emerging, but it is evident that decisions on what loans to modify will be left to the banks themselves. Many of the loans have already been packaged off and sold to investors (“securitized”), thus minimizing the impact on bank assets.

The $17 billion in loan modifications is a tiny fraction of the total negative equity (the value of loans in relation to the value of the underling houses) of $700 billion to $750 billion. The deal will affect less than 10 percent of US homeowners who are “under water.”

An additional $3 billion is to come in the form of mortgage refinancing, again left to the discretion of the banks. Joe Kishore

This settlement is not a settlement at all: it’s a payoff for services rendered.And when you pay off a co-conspirator, you can’t allow him to be investigated for his crimes less you risk exposing your own. The Obama administration was not in office at the time this all started, but the Clintons certainly were (repeal of Glass Steagall and the law which made regulating derivatives illegal – without these two pieces of legislation pushed by Larry Summers and the Clinton White House, we would not be here now) and the Bush regime played their part as well just as Obama is doing now.

In order to force the unpopular structural adjustments that the neoliberals wanted, a situation – a crisis situation – had to be created that was large enough to justify them and all the bailouts and Fed backed 0% interest loans. They packaged the economic time bombs into worthless derivatives that were then given AAA ratings by the complicit rating agencies then they sold those weapons of economic destruction to institutions that they wanted to decimate like state employee pension funds and public school investments. Goldman Sachs and others took these fraudulent packages overseas so they could decimate the social safety net of European nations as well setting up what is now happening to nations like Greece where they have appointed a trio of global bankers to basically hand over the national wealth of the Greek people to the kinds of people who sold them this crap in the first place.

This was a global conspiracy that eclipsed anything every attempted by the economic hit-men of yesteryear. And Barack Obama gets to be the president who lets it all slide and actually rewards the banksters for their criminal – even treasonous – acts.

The suffering these crimes have already caused and will cause is beyond contemplation. What’s worse is that once again it sets yet another precedent: there will be no accountability for crimes committed in pursuit of the new Fascist States of America. If something this blatant and obvious gets by the people of this country without a complete revolt, may god have mercy on us for what will come next.

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