Who’s sorry now after Bank of America agreed to pay $16.65 billion to settle mortgage claims generated by the housing meltdown, bringing to $37 billion the amount forked over by big banks for their evil ways.
The New York Times says—for the big banks—not so much as one might expect. No bankers are going to jail and a big chunk of the money will be treated as ordinary expenses for tax purposes. “These tax write-offs shift the burden back onto taxpayers and send the wrong message,” U.S. Public Interest Research Group analyst Phineas Baxandall told the Times.
Around $800 million of the latest settlement is headed for California and, like the earlier settlements, only a portion is aimed at homeowner relief. Moody’s doesn’t think BofA will take much of a hit on that account because “most of the cost of homeowner relief is already incorporated into existing loan-loss reserves.”
The BofA settlement includes about $7 billion in “soft” money, another way of describing help to consumers. Of course, many of the borrowers who got hosed in the debacle have already lost their homes to foreclosure. The Times described the terms of the deal as providing more consumer relief than the $13-billion settlement with JPMorgan Chase last year and the $7-billion settlement with Citigroup Inc. in July.
Consumer relief is a nebulous term that includes a very small portion of money for loan forgiveness and modification. But a big chunk goes to the financing of affordable rental housing, counseling, legal aid and the donation of property.
California picked up $200 million in the Citigroup deal and $300 million from JPMorgan Chase.
He said they schemed to package what they knew were worthless “toxic” loans and peddle them as security for complex financial instruments that were sold everywhere for years. “These loans contained material underwriting defects; they were secured by properties with inflated appraisals; they failed to comply with federal, state, and local laws; and they were insufficiently collateralized.”
But they were much beloved in the marketplace, where almost no institution questioned securities so complex and opaque that they couldn’t begin to fathom what was in them. All they knew was they could resell them in the market at a big profit . . . until they couldn’t.
When the bubble burst, big investors like CalPERS and CalSTRS, were left holding the flaming bags of crap, and homeowners, battered by the nosediving jobs market and collapsing real estate prices, were screwed. The government quickly jumped in to save too-big-to-fail banks with billions of taxpayer dollars and years later is striking deals with said banks to do something for everyone else.
The Sacramento Bee said the deal will make very few homeowners eligible for refinancing. And it may be 2018 before aid payouts are available. Bruce Marks, chief executive of the nonprofit Neighborhood Assistance Corporation of America, told the Bee, “It is certainly better than nothing. But for the millions who lost their homes, it reinforces the appearance that the government has not been on their side.”