If you are still using RSS (I know, it’s so last year with Google Reader disappearing soon), add Wall Street on Parade to your feeds. Pam Martens covers all things Wall Street, and if you want to stay in a permanent state of despair about the country generally, and economic fairness specifically, you should read it religiously. She has been covering the Senate hearings on the foreclosure “settlement” and you won’t believe this:
The settlement was to consist of $3.6 billion in cash being paid directly to more than 4 million aggrieved borrowers with another $5.7 billion in soft dollar assistance such as loan modifications, principal reduction and forgiveness of deficiency judgments. Yesterday’s bombshell, that the $5.7 billion may only amount to a paltry $12 million, was captured in this exchange at the hearing between Senator Jeff Merkley and Deborah Goldberg, Special Project Director of the National Fair Housing Alliance:
Senator Merkley: “In your testimony Ms. Goldberg, on page 10, you note that ‘on a loan with an unpaid balance of $500,000, a loan modification that provides any amount of principal reduction – be that $1,000, $10,000, or $100,000 – will yield $500,000 worth of credit for the servicer.’ It’s hard for anyone apart from this process to truly believe that if you do a $1,000 reduction you get $500,000 credit. Yet, are you saying absolutely that’s the way it works?”
Ms. Goldberg: “That’s what it says in the settlement…”
Senator Merkley: “Well, I’d just like to point out that the roughly $6 billion in soft money that’s in the settlement, at that 500 to 1 rate, that is reduced down to $12 million. Six billion goes to $12 million. That’s a vast difference. Now you’ve pointed out Ms. Goldberg that this creates a pure incentive to do reductions on large loans. Now I live in a working class neighborhood, 3-bedroom ranch houses. There are no $500,000 mortgages where I live ‘cause there’s no $500,000 houses. So your point in your testimony is that working class communities, certainly communities of color, there’s an incentive to kind of bypass them. Why would the Fed and the OCC agree to a structure that allows a 500 to 1 or more, for that matter…why would they agree to such a fictitious form of accounting and a structure that incentivizes the bypassing of working Americans in this whole process.”
Ms. Goldberg: “I think that’s an excellent question Senator Merkley. I’m afraid I can’t answer it. It would be a good question to ask them to explain.”
There are multiple reasons to believe that the banks, with the sycophantic regulators in tow, have gamed the system with this settlement. As we reported last week, Senator Elizabeth Warren delivered the bombshell in last week’s Senate hearing that the banks themselves were allowed to determine the potential number of harmed borrowers and classify them into categories of harm – thus effectively determining the monetary payments.
(via Wall Street on Parade)
Not to put too fine a point on it, it appears that the banks engineered a deal where they get to decide who they scammed, and then they get to call one dollar 500 dollars. (I wonder if I can repay my own mortgage using that kind of accounting?) For that matter, if they can find a million dollar mortgage out there they can convert a dollar into a thousand dollars. Plus, and why is this no surprise, they can get this rosy outcome by comforting the most comfortable among those they scammed (or decide that they scammed, and they are incentivized to decide they scammed the rich) while ignoring the most straitened. What a great country.