Last week, Bank of America did its best to present its latest settlement with the government over illegal foreclosures as a victory for borrowers and homeowners. Ten banks, including BofA, agreed to pay $8.5 billion to those who victimized by predatory policies. Before the settlement was reached, however, the government told banks to hire consultants to investigate the widespread abuse, essentially allowing a plaintiff to investigate his own case. A BofA spokesman told the Observer that the bank likes the government's "new approach" because it provides quick relief to borrowers and "homeowners still struggling to make payments."
Banks paid about $1.5 billion to consultants who — big shock — found very little unlawful activity. On Monday, five of those independently contracted consultants told the Huffington Post that they had been told "under threat of losing our jobs not to report what we saw." The charade ended when the Federal Reserve and Office of the Comptroller of the Currency came up with their swell deal, which effectively ended the investigation.
It's no big surprise that the investigatory process was tainted. Following the systematic weakening of one regulatory agency after another during the last 30 years, Washington is simply not set up to give a rip about ordinary Americans — in this case, the ones who were victimized by mortgage lenders. Most of our bank-abused fellow citizens will continue to suffer from the government's indifferent "investigation."
The following example gives you an idea of the absurdity of this particular deal, as well as of the government's subservience to corporate power: In spite of $3.3 billion being targeted for cash payments to 3.8 million borrowers, the "investigation" didn't bother to provide any data or analyses that would help determine how much those wronged borrowers should get — which was the original reason for hiring consultants. In other words, one of the end results of the government's failed inquiry is that the money will be distributed without decent information about the people who were actually affected or how badly they were hurt. Worse yet is the sad truth that it almost doesn't matter since the average payments to them would only be about $850. As a blistering New York Times editorial put it, that is "paltry compared with the harm of losing one's home in an abusive process."
And it gets worse. The deal also sets aside $5.2 billion for loan modifications for borrowers currently at risk of foreclosure. As the Times points out, formulas used to enforce a previous mortgage settlement agreed to by the government and banks has resulted in higher-income borrowers getting most of the money, even though the vast majority of the abused homeowners were in low-income communities. But hey, who cares, right? After all, it's a 1 percenter's world.
By the end of last week, complaints about the foreclosure deal were mounting, with various watchdog and consumer groups and a smattering of brave Congress members calling for a closer look at the settlement and how it was reached. One hopes something may come of those calls, but it doesn't look good, if recent history is any indication. Just in the past month, we've seen the Libor scandal, in which 16 of the top banks in the world were caught fixing global interest rates. We also saw former AIG honcho Hank Greenberg file a lawsuit against the government for charging excessively high interest rates for the taxpayer bailout money AIG received. And while HSBC agreed to pay a $1.9 billion fee for laundering drug cartel money and "advising" Iran on how to avoid paying taxes on its American holdings, it was on the condition that HSBC not be prosecuted in court — a condition our government readily agreed to.
Last week, Rolling Stone's Matt Taibbi summed up the current situation, in which bailouts of banks and lax prosecution have screwed untold numbers of people, as the "creation of a new sucker class," which includes small businesses, taxpayers, whistle-blowers, foreclosed homeowners, shortsellers of stock and the unemployed. I would add that until some criminal banker from the 1 Percent is sitting in a jail cell for a long time, the rest of us are part of the sucker class, too.
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