Looks as if the new U.S. Attorney General, Loretta Lynch, is taking over the so called pursuing of bank settlements along the same lines her predecessor Eric Holder did. Let’s hope that this time around the banks are held accountable and investors are finally compensated.
The settlements relate to securities backed by residential mortgages that plunged in value during the financial crisis. Banks are expected to pay from a few hundred million dollars to $2 billion or $3 billion each, depending on their size and the level of misconduct they allegedly employed in arranging the securities.
On the surface it looks good. The U.S. government appears to be pushing the Department of Justice to hold more of the Wall Street banks accountable for the 2008 financial crisis. To date, the three biggest banks have paid more than $35 billion in cash and “consumer relief” and seven more, which include U.S. and European banks, Barclays, UBS, Credit Suisse, Deutsche, HSBC, Royal Bank of Scotland and Wells Fargo, are in line. Morgan Stanley and Goldman Sachs may reach agreements by month’s end.
Considering that untold billions of dollars were lost as subprime home loans bundled into mortgage backed securities defaulted, the $2-3 billion payments are nothing compared to the misconduct the banks employed in arranging the securities. Needless to say the profits that were made as a result far exceed the penalties being enacted.
A bigger question is this: what’s the point of these D.O.J. exercises?
The D.O. J. gathers evidence of fraud and prepares fraud charges for court filing. Then, the banks pay “large” settlements and the evidence is then placed under seal so as not to be disclosed to the public. A “statement of facts” is prepared jointly by the banks and the D.O. J. which appears to be an admission of guilt but contains no real evidence of wrong doing. The public buys it and the banks are back in business.
[tweetthis]Let’s hope that this time around the banks are held accountable. ~ @RichardMBowen #2big2fail #DOJ[/tweetthis]
The government has viewed investigations as a way to hold banks accountable for the wrongdoing and greed that led to the financial crisis. Yet while the new D.O.J. team may be ramping up for the second round of shakedowns, my guesstimate is they will follow the same pattern the last team did.
The “evidence” comes to the public’s attention, fraud charges are prepared, the banks pay the “large settlements,” do not admit they are guilty and again get away without full redress for the grievance, greed and malfeasance. Almost all of the settlement monies paid by the banks go to the D.O.J. and not to the investors who lost the money.
The D.O.J. claims a new victory, is billions of dollars richer and the public never sees how widespread and pervasive the fraud actually is.
We’ve been down this road before and are still no wiser.
Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
