Having brought on the foreclosure crisis, that
threw so many consumers into foreclosure and
bankruptcy, they made a multi-billion dollar
settlement with the government after they
were caught with their robo-signing and other shortcuts and fraudulent acts.
Of course, the money was supposed to go to the foreclosure victims.
An independent (from the big banks, allegedly) review was set up to evaluate foreclosed homeowners’ claims, to cut up the pie.
I am not sure what would be an efficient way to do this. Each state has its own foreclosure law.
I talked to people who got a settlement check, which always included a letter saying they could still sue.
Most folks read this to mean they have a good case, which is incorrect.
There could have been technical irregularities, fraudulent affidavits, but that does not mean the foreclosure would not have gone through anyway.
Some of them had homes worth half of the mortgage balance, so it would be hard to get any damages for foreclosure of that home, when the homeowner was not stuck with any deficiency balance.
That is, the bank took the home by foreclosure, and wrote off the mortgage debt.
So, yeah, tough to determine individual damages on hundreds of thousands of cases.
But last February, regulators decided after two years with only 100,000-some cases reviewed that the process was too much trouble, and opted instead for a $9.3 billion settlement with the biggest mortgage companies that awards the victims pennies on the dollar for their losses.
But still, the way disbursement of the funds was handled is just another scandal.
Bend over for Big Bank.
In all, 80% of those subject to the foreclosures covered by the agreement will get $1,000 or less, while the outside consultants who handled the review reaped a windfall of $2 billion, nearly $20,000 for each case actually reviewed.
Of course, the “outside consultants” are largely ex-bank or government bank regulators, who are only “outside” while waiting for the revolving door to come around to them again.
Darrell Delamaide goes on to explain, in his USA Today column linked to above:
An article in this month’s American Banker Magazine describes how Ludwig built Promontory “into a shadow network between banks and regulators.”
As an example of just how quickly the door revolves at Promontory, the magazine noted that the firm in January hired Julie Williams, former chief counsel at the OCC, and the regulator replaced her days later with Amy Friend, who was a managing director at Promontory.
And earlier this month, Promontory announced it was hiring Mary Schapiro, who stepped down in December as chairman of the Securities and Exchange Commission.
In the other direction, Sarah Bloom Raskin, who became one of the seven members of the Fed’s Board of Governors in 2010, had been a managing director at Promontory earlier in her career.
Nice work if you can get it. The banks screw the country, then the taxpayer who is forced to bail them out.
When they finally get caught with their tit in the wringer, their ex and future employees and regulators take the lion’s share of the settlement funds, and the foreclosed consumer is screwed yet again.