The obscene greed-and-arrogance stories emanating from Wall Street are piling
up so fast, it's getting hard to keep up. This one is from last week, but I
missed it – it's about the foreclosure/robo-signing settlement that was concluded earlier
The upshot of this story is that in advance of that notorious settlement, the
government ordered banks to hire "independent" consultants to examine their loan
files to see just exactly how corrupt they were.
Now it comes out that not only were these consultants not so independent, not
only did they very likely skew the numbers seriously in favor of the banks, and
not only were these few consultants paid over $2 billion (over 20 percent of the
entire settlement amount) while the average homeowner only received $300 in the
deal – in addition to all of that, it appears that federal regulators will not
turn over the evidence of impropriety they discovered during these reviews to
homeowners who may want to sue the banks.
In other words, the government not only ordered the banks to hire consultants
who may have gamed the foreclosure settlement in favor of the banks, but the
regulators themselves are hiding the information from the public in order to
shield the banks from further lawsuits.
Secrets and Lies of the Bailout
To recap: in the foreclosure deal, 13 banks agreed to pay a total of $9.3
billion to settle their liability in a number of areas, including robo-signing,
which is just a euphemism for mass-perjury – robo-signing is the practice of
having low-level bank employees sign documents attesting to full knowledge of
case files in court foreclosure actions, when in fact they were signing hundreds
of files per day, often having no idea whether the paperwork was correct or
It was done across the industry and turned housing cases across America into
nightmares of jumbled and/or forged paperwork, in which even
people who did not deserve to be thrown out of their homes were uprooted thanks
to systematic errors by faceless bureaucrats who cut legal corners purely to
All the major banks were guilty on a mass scale, but they worked with federal
regulators like the Fed and the Office of the Comptroller of the Currency to
secure this wide-ranging, industry-saving settlement, which not only covered the
robosigning epidemic but a host of other bad or illegal practices, like the
wrongful denial of modifications and the improper levying of (often hidden)
Minus this crucial settlement, banks would have faced enormous uncertainty
about their legal liability going forward, and getting a deal that not only gave
these companies some legal closure but allowed them to pay pennies on the dollar
for their illegal activity was a massive coup for the whole finance sector.
Only $3.6 billion was earmarked for cash payments to the nearly 4 million
homeowners covered in the settlement. Most of the remainder of the deal was in
other forms of non-cash relief, i.e. modifications or principal reductions.
Now, at the time of the deal, press releases by the Fed and the OCC stated
that part of the reason they'd fixed on that particular settlement amount was
that regulators had uncovered that banks had made errors or committed illegal
acts in about 6.5 percent of the mortgage files reviewed. In other words, the
error rate was an important component of this calculation.
But it turned out that this error rate had been calculated with the help of
several consultant firms regulators had ordered the banks to hire. Regulators
had mandated the hiring of these "independent" consultants back in 2011, and the
list of companies included Promontory Financial Group, PricewaterhouseCoopers,
Ernst & Young, and Deloitte & Touche. These private firms were hired to
review the banks' loan files in search of errors, and collectively were paid by
the banks over $2 billion, a staggering sum which ultimately worked out to over
$20,000 per file.
Read more: http://www.rollingstone.com/politics/blogs/taibblog/while-wronged-homeowners-got-300-apiece-in-foreclosure-settlement-consultants-who-helped-protect-banks-got-2-billion-20130426#ixzz2RsO90Esi
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