SAM SEDER: Millions of Americans remain angry that U.S. banks, that helped crash the economy and then foreclosed on millions of homes, seem to have gotten away with it. Now, the White House says relief is on the way.
The fifth story on the "Countdown" — President Obama announcing a $26 billion settlement between 49 states, the federal government and five banks that should help, perhaps, a million beleaguered home owners and hundreds of thousands whose homes were swept up in the crash. Though critics are already asking, "Is it enough?"
More than four million Americans lost their homes to foreclosure after the housing market collapsed five years ago. An investigation by all 50 states' attorneys general that followed in 2010 found that major mortgage lenders had, in many cases, committed foreclosure and mortgage fraud, pushing overwhelmed homeowners into foreclosure, often by using falsified, fraudulent or flawed documents.
After 16 months of negotiations, there is a deal. President Obama, saying the banks most responsible — all of them rescued by taxpayer dollars — will now have to right those wrongs:
(Excerpt from video clip) OBAMA: These banks will put billions of dollars towards relief for families across the nation. They'll provide refinancing for borrowers that are stuck in high-interest-rate mortgages; they'll reduce loans for families who owe more on their homes than they're worth and they will deliver some measure of justice for families that have already been victims of abusive practices.
SEDER: Breaking that down, five big-time mortgage providers are taking part in the settlement — Wells Fargo, Bank of America, JPMorgan Chase, Citigroup and Ally Financial. Bank of America's on the hook for the most, some six — some $8.6 billion in principle reduction, followed by Wells Fargo and JP Morgan Chase, with more than four billion each. Of the total, $17 billion goes to homeowner relief, chiefly in the form of principle relief and mortgage modification. Another five billion in cash is earmarked for states and authorities impacted by the housing crisis, including $1.5 billion in direct payouts to homeowners unfairly foreclosed upon. And there's three billion for refinancing and one billion for the Federal Housing Authority.
To Attorney General Eric Holder, the settlement is a triumph:
(Excerpt from video clip) ERIC HOLDER: This agreement reflects our commitment, at both the federal and state levels, to insure justice and to recover losses for victims of reckless and abusive mortgage practices. In fact, it is the largest joint federal/state civil settlement in the history of this nation.
SEDER: Largest settlement, but not much for as many as three-quarters of a million people who lost their homes. Their share — if and when they collect it — would top out around $2,000 each.
But however this settlement works out for them, it's coming at a good time for President Obama.
The latest Gallup poll shows just 38 percent of Americans adults approve the way he's handling the economy. That number was down to 26 percent last August. And, with key states like California, Michigan, Florida and Illinois still in the top 10 for foreclosures, mortgage relief for as many as a million homeowners could give his re-election chances a boost, come this November.
For more on this settlement, I'm joined by Rolling Stone contributing editor and "Countdown" contributor Matt Taibbi. Matt, great to have you with us.
MATT TAIBBI: Good to see you, Sam.
SEDER: Now, a few weeks ago you wrote on your blog that you were optimistic about this settlement. Today, you are not so sure. What's changed?
TAIBBI: Well, really, nothing has changed, I just thought about it more. I think, initially, what I was thinking — and a lot of other people who follow this issue were thinking — is that this could have been a lot worse. There were rumors, before they struck this deal, that it was going to contain a broad liability waiver for everything from criminal activity, to securitization and origination, to the MERS violations — the electronic mortgage registry stuff — and it really, I mean, in the end, it just turned out to be a settlement that covered robo-signing.
But, when you think about it, the robo-signing was so extensive and so pervasive throughout the entire economy, that the actual liability that these banks would have faced was a lot more than $25 billion. In fact, there are some people who would argue this turned out to be a bailout that was really as big as TARP, because the negative equity produced by these practices could have been as much as $700 or $800 billion. So, the banks got out of maybe that much in liability, ultimately, and maybe that's not such a good deal for people.
SEDER: Do you think that was part of the urgency to make this settlement, was basically that you had some attorneys general across the country who were starting to look into robo-signing? Which is essentially — it's forgery and fraud, all sort of —
TAIBBI: And perjury.
SEDER: And perjury all rolled into one. Do you think the administration was — had an urgency about this because the banks were basically saying, "If this gets uncovered, we're in big trouble."
TAIBBI: Oh, absolutely. If enough of these cases started to go forward — if you look at that and take that in tandem with the other mortgage-backed securities-related suits; the banks like Bank of America that would have been facing billions of dollars in buybacks for their securitization practices; add that to the foreclosure suits — a lot of these banks would have gone out of business if they would have had to face, you know, actual litigation for all of this. So, they needed this settlement in order to survive, that's absolutely true. Especially Bank of America.
SEDER: So, Housing and Urban Development Secretary Shaun Donovan called this — this settlement "a big victory for those who have been harmed the most." Does that include people who lost their homes in foreclosure and will now collect, essentially, no more than $2,000, if they —
TAIBBI: If they even get it.
SEDER: If even get it and if they are aware that they can actually apply for it. I mean, because it doesn't actually give it to them, it actually just says you're allowed to apply for it.
TAIBBI: Yeah, you have to remember that one part of this deal is — they folded it in on a consent decree that it already taken place with Countrywide, where Bank of America was supposed to pay out something like $8 billion in claims and they only paid out $213 million at the time of the deal. So, they've already ignored one decree, and now we have another, bigger decree, where we have to take their word for it that they're going to follow through and pay this money. We have no guarantee that they're actually going to do that.
And, even if they do do it, you know — it's essentially a Kewpie doll that they're giving these people who have lost their homes, or who are underwater in their houses. It's not enough to really stem the tide or turn the tables for these people.
SEDER: Now, as of last week, New York Attorney General Eric Schneiderman, and Delaware Attorney General Beau Biden had refused to sign on it. They joined the settlement, basically saying the concessions had come. Do you think he is right? I mean, do you think — what is his strategy here? Has he basically been bought out, or is he going to go forward?
TAIBBI: Well, the gamble here is that people like Schneiderman are going to open what they call a "second table" and that they're going to go after the banks on other offenses like securitization — the so-called "pre-bubble" offenses, creating the loans — as opposed to what happened after they created the loans, which is the foreclosure offenses.
And Schneiderman is talking like he's really go after the banks for that. And that, to me, is actually a much bigger and more extensive fraud than even the foreclosure stuff, which is huge enough in itself. So, if he's serious about that, you add that plus the MERS thing — which is the Mortgage Electronic Registry System — which is a huge scheme to evade taxes and not do paperwork. The banks are still vulnerable there and in securitization and origination. And, if he's real about it, if he's really going to go after it, he could still do a lot of damage.
SEDER: Well, Matt Taibbi, we will continue to follow what you were writing as this progresses and I guess we'll know in about — according to Eric Schneiderman, six to eight months — if we see more activity.
TAIBBI: Exactly.
SEDER: I think he's on record saying that. I appreciate you talking to us about this. Many thanks for your time tonight.
TAIBBI: Good to see you, Sam.
