Mortgage Settlement as Attorney General Sellout: Deal is Not Done, and Final Version Guaranteed to be Worse Than Advertised

You know it’s bad when banks are the most truthful guys in the room.

Remember that historical mortgage settlement deal that was the lead news story on Thursday? It has been widely depicted as a done deal. The various AGs who had been holdouts said their concerns had been satisfied.

But in fact, Bank of America’s press release said that the deal was “agreements in principle” as opposed to a final agreement. The Charlotte bank had to be more precise than politicians because it is subject to SEC regulations about the accuracy of its disclosures. And if you read the template for the AG press release carefully, you can see how it finesses where the pact stands. And today, American Banker confirmed that the settlement pact is far from done, and the details will be kept from the public as long as possible, until it is filed in Federal court (because it includes injunctive relief, a judge must bless the agreement).

This may not sound all that important to laypeople, but most negotiators and attorneys will react viscerally to how negligent the behavior of the AGs has been. The most common reaction among lawyers I know who been with white shoe firms (including former partners) is “shocking”. Let me explain why.

Negotiating of large, complex deals (or even little deals) does not happen in one fell swoop. Even when the two sides have outlined the major terms, and in sone cases hammered out the really important ones in some detail, there is still a great deal of negotiating that takes place in finalizing the text of the contract. The negotiation over the definitive agreement makes a great deal of difference on how fair the pact turns out to be. For instance, one of the sayings of transaction lawyers is “He who controls the document controls the deal.” The party that writes up the initial version of the contract has undue influence because that becomes the default and the other side has to negotiate back from that language.

As attorney Max Gardner said via e-mail (boldface ours):

I would never tell a client that I had settled a case or claim against a creditor until the ink was on the final written settlement agreement. I would of course advise the client of the verbal offer and secure the client’s acceptance but would always say something like “don’t spend any of the money because as Yogi might say it ain’t over until we have the signed agreement and their check has cleared my trust account.” An attorney would be guilty of serious ethical violations if he or she told a client we have a settlement with BoA and it is final before the deal was closed out by written agreement and in my bankruptcy practice the agreement was approved by the court. The AGs have said this agreement must be approved by a Federal District Court Judge so really why would you make such public announcements before at the least a written agreement signed and inked by ALL of the parties.

Why is it deeply troubling that the attorneys general have gone along with the Administration’s messaging and have all fallen in line with the “biggest Federal-state settlement ever” when no such settlement in fact exists? This isn’t just acceding to the Administration’s pet wish to build on its State of the Union PR. They’ve completely abandoned their negotiating leverage at a critical stage.

Let’s look at this equation. The Administration and the banks both want a pro-bank deal (the only minor point of difference is how much in populist gestures the banks have to submit to in order to get the much more valuable bennies they want). The only parties that cared to any degree about ordinary citizens were the dissident AGs. But they now have now given up any bargaining leverage over how this deal turns out.

The only power any party has in a negotiation is his threat to leave the bargaining table. The AGs can no longer do that. They’ve taken star turns, made ringing pronouncements of how great this pact is. They can’t possibly reverse themselves mere weeks down the road and say, whoops, this deal isn’t go great after all.

The AGs had to have known what they were doing in capitulating. Delaware’s Beau Biden was one of the most outspoken AGs after the Schneiderman destabilized the opposition by putting himself on the sidelines, making it clear he had not signed on when most other AGs remained silent. Yet in an interview with Dylan Ratigan early last week, he sounded as if the fight had been beaten out of him, that he was resigned to signing on to the agreement if he could preserve the MERS suit he had filed and add bank names to it later if the facts warranted. What sort of veiled or not so veiled threats did the Democratic party operatives make to get him to fall into line?

I hate using Biden as an example because he resisted down to the end. I don’t see how any seasoned attorney could possibly have misunderstood what he was giving up. Maybe the last holdouts felt even en bloc that they had no sway and even if they all stood aside, it would hurt them with little upside for their constituents. But agreeing to a pig in the poke would never be acceptable in the private sector, and the AGs can’t pretend not to know how outside the pale their conduct was.

We’ve seen an analogous process at work in the Dodd Frank bill. It was widely described as a “bill to come up with a bill,” with a lot of provisions either subjected to studies or kicked over to regulatory rulemaking to come up with a final version of the provision. The result has been that it has given the banks another go at the bill, and various media reports indicate that they’ve done a very good job in blunting the impact of many provisions.

Now some readers might argue that this analogy is unfair, that the mortgage settlement is much further along that Dodd Frank was. That might seem to be true. However, the attorneys general are not experts in securitization, and benign-sounding language can have implication that they don’t appreciate. And some of the responses from AG offices to simple questions suggest they are over their heads on this deal.

And the American Banker article indicates that the deal has a lot more points still open that the Administration’s victory lap would lead you to believe:

…a fully authorized, legally binding deal has not been inked yet….A representative for the North Carolina attorney general downplayed the significance of the document’s non-final status, saying that the terms were already fixed…

Other sources who spoke with American Banker raised doubts that everything is yet in place. A person familiar with the mortgage servicing pact says that a settlement term sheet does not yet exist. Instead, there are a series of nearly-complete documents that will be attached to a consent judgment eventually filed with the court. That truly final version will include things such as servicing standards, consumer relief options, legal releases, and enforcement terms. There will likely be separate state and a federal versions of the release…

Whatever the reason for the document’s continued non-appearance, the lack of a public final settlement is already the cause for disgruntlement among those who closely follow the banking industry. Quite simply, the actual terms of a settlement matter.

“The devil’s in the details,” says Ron Glancz, chairman of law firm Venable LLP’s Financial Services Group. “Until you see the document you’re never quite sure what your rights are.”…

And there is plenty more still to be worked out under all circumstances.

“Even once we get to the final terms, the servicers we’re told are going to be allowed to develop their own plans,” says NCLC’s Thompson. “They’re going to have three months to develop those from when the settlement is approved by the court. We are a long way in lots of ways from being able to kick the tires.

Now why the rush to get a photo op? I don’t buy that this was driven by election timing. A lot of studies show undecided voters make up their minds in the last month or at most two before the election. Big news is more effective closer to the election.

Maybe the Administration believes its own PR and thinks this measley program will help the housing market, or more important, secure the fealty of banks. But my guess is that the fact that 15 AGs concerned about the negotiations had met is what pushed the Administration into high gear. They did not want a meaningful, cohesive opposition forming. In addition, I am certain some evil genius in the Administration understood full well the value of destroying the AGs’ bargaining leverage before the final phase of negotiations.

Oh, and what about the other bombshell in the American Banker story:

American Banker asked The Department of Justice, the Department of Housing and Urban Development, and the offices of Attorneys General in Iowa, North Carolina and Colorado for a copy of the settlement last night. Only Iowa, North Carolina and the Department of Justice have responded, saying that the document would not be available until it is filed with the court on a yet-undetermined date.

Diane Thompson, an attorney with the National Consumer Law Center, said it was “unusual” that a settlement agreement had not been released. But the officialdom has gone further than that, and has said they won’t release the document until it has to be made public, via a Federal court filing.

Why would they choose to delay publicizing such important information? The most logical reason is they want it to be public the bare minimum amount of time possible prior to court approval, so as to give opponents (read aggrieved investors) the tightest window possible for filing motions opposing the pact. This deal was done within a very small group, and the two parties most affected, homeowners and investors, were and continue to be kept as far away from the process as possible.

And there are signs that AGs were really over their heads on this one, independent of the Administration’s gamesmanship. This was from reader LucyLulu:

Spoke yesterday with an associate of my attorney general yesterday and had a most frustrating conversation….

One of the many interesting tidbits she did share however (and I am unsure how reliable her info was) was that no investor owned modifications of loans would occur without first obtaining consent of the investors…I tried to nail down how this consent would be obtained, she was reluctant to provide details, just to say how consents from shareholders are normally obtained.

Now this may simply be an out-of-the loop staffer making things up, but another correspondent heard pretty much the same “we’ll get approvals” palaver from another AG’s office. I have to tell you, they most certainly WON’T obtain consents as they do in shareholder land (as in preparing and sending out proxies and soliciting votes on contested matters). Moreover, the standards for what level of approval is required varies by deal: some it’s a simple majority (presumably by par value), some require majority approval of each tranche, some require a supermajority (2/3 or even 75%). The Administration is likely to be taking the position that they don’t need consent in most deals if the mod is NPV positive. And given that they can pick the parameters that are most flattering (loan level v. portfolio level, discretion over time horizon chosen for measurement), I’d suspect that investor consent will not be obtained (unless investors start making serious noises, which seems less likely than it did last weekend).

Reader Mikent was correct when he called this deal a robosettlement. Just like its namesake, it’s more about getting it done than doing it right.

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  1. Steven Matherly

    Ms. Smith: You are wonderful! I’ve been following this story recently and you are the only one I’ve found that is telling the truth about this.

    1. June Goodwin

      Yes, thank you so much Ms. Smith. Your coverage is extraordinary. (I’m glad to see you being picked up extensively on tv and other media.) Do blogs get Pulitizers?

      1. psychohistorian

        Yves has been putting this sort of quality forward for years now.

        She deserves a Congressional Medal of Honor or better after we take our government back.

  2. Bill G

    I’ll go out on a limb and guess that any changes to the agreement favor the banks and that the politicians just wwant a deal – any deal – so they can thump their chests about what great people they are. The banks probably don’t care as much as the politicians so they will win any last minute mods.

  3. Conscience of a Conservative

    Obama has shown that his actions of late are to one end, his re-election. We just saw another eample of this on birth control and Catholics.

  4. Woodrow Wilson

    Let me know when Americans decide to come off the sidelines.

    Right now they’re spectators, as they watch their childrens futures literally be robbed (again) right in front of them.

    Since there is no longer a Rule of Law, what’s holding them back?

    1. oldsoul

      This bears repeating:
      Colonel Edward Mandell House, an advisor to President Woodrow Wilson (the President who signed the Federal Reserve Act and the creation of the IRS into law) boldly described the scheme to enslave the USA over the last 100 years: “[Very] soon, every American will be required to register their biological property in a national system designed to keep track of the people and that will operate under the ancient system of pledging. By such methodology, we can compel people to submit to our agenda, which will effect our security as a chargeback for our fiat paper currency. Every American will be forced to register or suffer being unable to work and earn a living. They will be our chattel, and we will hold the security interest over them forever, by operation of the law merchant under the scheme of secured transactions.
      Americans, by unknowingly or unwittingly delivering the bills of lading to us will be rendered bankrupt and insolvent, forever to remain economic slaves through taxation, secured by their pledges. They will be stripped of their rights and given a commercial value designed to make us a profit and they will be none the wiser, for not one man in a million could ever figure our plans and, if by accident one or two should figure it out, we have in our arsenal plausible deniability. After all, this is the only logical way to fund government, by floating liens and debt to the registrants in the form of benefits and privileges. This will inevitably reap to us huge profits beyond our wildest expectations and leave every American a contributor to this fraud which we will call “Social Insurance.” Without realizing it, every American will insure us for any loss we may incur and in this manner, every American will unknowingly be our servant, however begrudgingly. The people will become helpless and without any hope for their redemption and, we will employ the high office of the President of our dummy corporation to foment this plot against America.”

      1. aletheia33

        my earlier response to you, oldsoul, also bears repeating (in part):

        please, you are not helping. i bet you even think edward mandell house was really a colonel. the only source for this quote i can find in google books is from the book mel stamper, fruit from a poisonous tree, which claims this quote is from woodrow wilson’s personal papers but with no attribution. in fact, the book has no bibliography. until shown otherwise, i can only conclude that, not that differently from the latest “robo-settlement” (h/t Mikent)–with its new robo-website created by “no one” willing to take credit for it–said book is, as people used to say, “nothing but a pack of lies.”

        attribution! citation! documentation! these are some of the bones of democracy, such as we always thought we had a bit of, anyway. attribution is required, at least on this site, for credibility. libraries, the last i checked (and i know this may not hold for much longer) are free of access to all, and many librarians (remember the occupy libraries, before the evictions?) are passionate about keeping that freedom.

        i suggest you do a little research. find that quote in wilson’s papers. contact the woodrow wilson presidential library. you’ll find a librarian willing to help you, i guarantee it. this is a quest worth undertaking. come back here when you’ve got the goods. if you can show this passage exists on actual paper or microfilm thereof, your information will be welcomed here with open arms.

        to the history-minded nc readers: can you provide a link to where a u.s. history scholar has established the source or nonexistence of this supposed quotation? is none has, one should. this quote is all over the internet. where’s the verification?

        side note: is the level of paranoia in a given society a reliable indicator of its level of collective trust and transparency of officialdom?

        1. CaitlinO

          Use of the phrase ‘plausible deniability’ back in Wilson’s time is suspicious. I never heard the term until the seventies but my father said he had heard it for the first time near the end of World War II. We both agreed it was pretty despicable.

      2. kris

        French have a great saying:”lus ça change, plus c’est la même chose”. English: The more it changes the more it is the same thing.
        What is new under the sun? (Ecclesiastes)

    2. Piano Racer

      ​“The illusion of freedom will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.” — Frank Zappa

    3. different clue

      Disbelief for one thing. How many American still believe that Lee Harvey Oswald shot President Kennedy? Acting alone? And you want those people to believe anything they would read here, if they even knew this site existed? If they even had the time and energy to read it?

      And among those who are willing to believe it, how many are prepared to get in the face of the Armed Goverstate and its machine guns, cancer gas, LRADs, Raytheon OvenRays, etc?
      And how many of those are willing to get in the face of the Private OverClass Blackwater/DynCorp/Triple Canopy Private Securistate? I’m not. Are you? You can say you are to impress us all here on these threads, but are you really? In the privacy of your own mind?

      So we will have to cultivate a spirit of violent nonviolence and polite hatred and work out oh-so-exquisitely-legal ways to begin undermining and tearing down the OverClass’s Economy and their revenue stream concentration methods.

      1. Woodrow Wilson

        “I’m not. Are you?” –

        Since I’ve already done it in both the military and civilian capcities, yes, I am. The only difference this time, I’m not as brainwashed. The only problem I see, is reaching the 3% threshold needed to be on the same page.

  5. rjs

    who knew that oklahoma negotiated their own settlement?

    Oklahoma was the only state to pass on the deal. That’s because they reached an independent settlement worth $18.6 million,

    Oklahoma Attorney General Scott Pruitt said he chose to reach a separate agreement because he thought the national settlement was too broad.

    He said, “We believe the national settlement was more to fix the housing market instead of misconduct and wrongful mortgage practices.”

    1. Dave of Maryland

      Oklahoma got 18.6 million, not billion. I checked the Fox23 site. Unless that’s another one of Fox’s famous typos. Oklahoma’s annual tornado losses are greater than that.

  6. Damian

    Yves your assumption on the timing of the deal to thwart the opposition from getting to far along is the most plausible – further – the release of any details to stop comments or motions in opposition to the friendly judge thye have chosen makes sense – there seems to be no one at your level of detail in the media following this – it is now finally sinking in for me – how captured the press is on all of this –

    bank fraud has been institutionalized as a business tool by the states and the federal government – must be unprecedented – even if only for past deeds – everyone will assume they can do it in the future if they want for anything else in the system

    i suspect even hardened cynical litigators are blown away by the extent of the crimes and the elegance of the waivers in broad daylight

    there have been no RICO charges or filings or class actions of note to my knowledge which must mean – they all knew not to bother – the fix was in !

    1. oldsoul

      There is a pending RICO case for the benefit of homeowners in one court. We do not want press coverage because the judge could be made vulnerable if there was any publicity. So far, the 11 billion dollar case has escaped notice.

      1. different clue

        Is there a way to describe how this was done and designed and so forth just informative enough so that others can do the same in other court-covered jurisdictions; but generalized enough so that no analyst could possibly work out what particular court this is working through?

  7. dSquib

    We must not let the perfect be the enemy of the good, even when the “good” in question is, in fact, bad.

    Scratch that.

    We must not let the good be the enemy of “doing something”.

  8. sleeper

    I think you’re correct as far as the motivation of the administration goes.

    However here’s an alternate view –

    First note that neither side of the aisle has picked up this issue and other than a few clerks of courts, recorders of deeds, or occasional lawyers no one has been willing to make mortgage fraud an issue.

    And an interesting corollary is the revulsion / rejection /distaste of the establishment towards Newt’s Bain Capital ad.

    There is a bit of terror in the hearts of the banking industry that the mortgage fraud issue will grow to become a popular movement. And it is clear that there is a drip drip drip of evidence wearing away the protection of the banks.

    And there is the curious silence of most of the state AGs. It is doubtful that they are unaware and yet nothing is said or done. After all they do receive many complaints.

    My guess is that it works like this –

    The banks know that the game is changing and most likely to their disadvantage.
    The banks have played the administration with the usual carrots – “it’s just a paperwork issue” “Deadbeats” “Sharp trading practices perhaps but no criminal acts.” And these have become the public statements of the administration. And the adminstration seems to believe them.

    And the stick held barely out of sight is “The banks will freeze the credit market including the credit for state bond issues” or “We’ll lower your credit ratings.” Note that Mr. Bloomberg has stated this publicly in no uncertain terms.

    So this agreement is driven by the banks not Mr. Obama’s reelection hopes or dreams.

    And again an interesting corollary – news reports seemingly indicate that the donations / bribes from the financial sector to the Obama administration are down.

    While the reporting by Yves and a few others is fun to read it is clear that if we leave the resolution of this problem to the banks and their minions like Mr. Obama it will continue to be papered over.

    So what to do?

    Here are a few suggestions –

    Move your money from the big banks.
    Limit your use of credit as much as you are able.

    And I’m sure that there are others.

    And for the more adventurous –

    Perhaps a direct action campaign aimed at LPS, MERS, any one of the many foreclosure mills, and so on. In short any action to make these guys life a tad more difficult. After all the establishment won’t be doing anything anytime anyway.

    And in particular are there any training sessions available to train ordinary folks in how to search the local clerk of court / county recorder’s office for evidence of fraud which could then be passed along to the state bar association ?

    Now it is a forlorn hope the state bar association will actually take action but complains would have the effect of driving the wedge between ordinary folks and the rest ever deeper.

    1. different clue

      I like the way you think. Thousands and then millions of people doing legal things to slow down the working of the OverClass’s wealth-concentration system.

      Moving the money around by the nose . . . from black hat megabanks to gray hat middlebanks and white hat microbanks and credit unions. Using the least possible credit for daily life purchases and the most possible cash and checks after that. And for the times when one MUST use credit, have credit cards issued by a credit union or at worst a white hat microbank, not a black hat megabank.

      If one is saving to “buy” a house, how many years can one tolerate living in below-one’s-means rented space in the meantime? One could use that time to look for houses whose current deeds are currently recorded in a physical county courthouse. No deed? No sale! Measures like that.
      And if no such already-recorded-at-the-courthouse houses exist, one could demand that the would-be house-seller first
      be required to retro-register the deed to the house at the relevant county courthouse. No retro-registration-of-deed?
      No sale! Is this a possible concept?

    2. Praedor

      What of N. Dakota? What bank can threaten the credit markets in N. Dakota, the only (proper) state that has its own independnet STATE-run bank? I would think this would make N. Dakota totally inured to any banking threats as it simply doesn’t need them so there would be no need to cave in and go along with the settlement. There is no real threat possible from the criminal private banks (by nature, ALL private banks are criminal).

  9. Jean paul Marat

    The American people have just been screwed by the Teleprompter-in-chief-of-the-United-States, Turbo Thimmay, and AG “Place Holder”.

    1. Transit Rat

      Obama glorified the Banksters; the most important aspect of their mechanism is to provide for the most violently powerful military in the world. In the changelings of our protests which take us from the ineptitude or co-option of our politicians and law enforcers to some nebulous concept of fairness, this reality is generally off limits to frank analysis. The underlying carnage that is bloody in other countries but only mildly less so here, is evidence that power deeply depends on violence. Hurling families to the street for example, is simply a business incentive.

      1. Carla

        I agree, very well said.

        For a historical view, and a look at what the 1% has in store for us, be sure to read Douglas Blackmon’s “Slavery By Another Name.” You can also watch the new PBS documentary of the same title Monday, Feb. 13 at 9:00 p.m. eastern. But to get the real picture, you gotta read the book.

        1. Praedor

          What the 1% has in store for us is clearly visible: it is Greece. Thus, this is why there was a rush to get the bill passed allowing for smothering domestic 24/7 drone flights. There was absolutely NO justification given for why this should be done. They didn’t even relegate it to border states so they could try and say it was all to secure the borders. They passed a nationwide drone surveillance bill so they can keep a close eye on the People for the coming time when they DO get restive and violent ala Greece.

          A whole host of laws passed for the “War on a Tactic” have been written and are being used domestically for purposes totally outside their originally stated intent. The domestic drone bill didn’t even go to that bare extent. The Congress simply decided that outright spying on Americans 24/7 is fine and dandy.

  10. LeeAnne

    As we discuss the latest antics of a worldwide criminal enterprise with no mention of the 30,000 drones approved by an equally criminal US Congress, I can hear Reagan’s ghost leading the hallelujah chorus for a Star Wars on a scale even they couldn’t imagine.

    1. LeeAnne

      and Congratulations to you, Yves, and everyone contributing to this blog, for your increasingly effective teaching of the principles of decency in business and governance. It is after all ordinary decency that informs ‘rule of law’ or should.

  11. BillyBob

    Tom Miller’s people haven’t been investigating, and they haven’t been grinding out the details. So, other than taking bank money into their campaign accounts and sending out a press release about an imminent settlement every few days, what the hell have they been doing?

    The star turns are unfortunate, and Schneiderman is especially caught in the net, but is there any legal reason that state A’sG can’t refuse to sign final versions of the pending dog’s breakfast?

  12. Norman

    There he goes again: yes, the revolution will be televised. You can only push humans so far, before there is rebellion. How close we are to that point, remains to be seen. This year will be telling, as the politicians are distracted with their annual bending over in satisfying their master’s demands, who are not you and me.

    1. Greg R

      Yes, how close are we to that point?

      No one was walking around warning of a Kent State incident in the weeks leading up to Kent State. Newark started as a rumor. Five days later, 26 people were dead and the city burned down.

      Suppose as the weather warms up, there are a dozen Oaklands instead of one.

      The 1% may believe this is manageable, but things don’t always remain tidy.

  13. Fraud Guy- Also

    I really hope that Yves will post soon about the OTHER mortgage settlement that occurred the same day as the big pseudo-settlement was announced. HUD released BofA from liability for submitting non-conforming (i.e., fraudulent) loans to the FHA insurance pool and collecting insurance payouts on them:

    FHA origination fraud is an absolute cesspool, with massive and ongoing fraud in terms of non-conforming mortgages being submitted for federal insurance coverage. It is a classic privatization ideology model, as the design of the program does not provide for FHA to perform any role in assessing the conformity of individual loans submitted to them for insurance. Instead, the originating banks apply to become “Direct Endorsement Lenders”, which means that they become agents of FHA in that they gain the power to put a government insurance wrapper around loans that they themselves originated. Conflict of interest, anyone?

    Most appalling of all is the fact that the pseudo-settlement announcement included claims by the government that the release was very narrow and didn’t include any origination release. That’s because they put the origination release in what they consider to be a separate settlement. This release is massively, massively valuable and worth many times what BofA paid for it ($1 billion). The question now is whether the other major Direct Endorsement Lenders (the big banks) are negotiating their own FHA settlements.

    1. Rebel Cole

      Indeed! These five banks are sitting on $60 billion in FHA-insured mortgages that they had to repurchase from investors. They have not presented them to FHA fearing prosecution under the False Claims Act. Now they have a get-out-of-jail free card courtesy of Shaun Donovan. This will bankrupt FHA and force yet another taxpayer bailout. Look for a story on this in the American Banker early next week.

    2. Susan the other

      Also yesterday the MSM noted that Warren Buffett was the only person to actually benefit from the settlement agreement because he made something like 11 million in interest on his 5bn loan to BAC. Curiouser and curiouser.

    3. kris

      Liability cannot vanish. Nothing can vanish. Who gets the loss? If BAC is not getting the loss, who gets it?
      Then, the entity who assumes the loss, does it have lawsuit capability?
      USA is a lawsuit country. It just makes the situation quite more complex, but not nearly releases BAC from liability, just like that.

      1. Fraud Guy

        BofA’s counter-party here is you and me, with the FHA acting as our agent. By “releasing” the liability, FHA effectively assumed it. So The liability did not vanish, you are correct. You want to find it? Take a look in the mirror.

        1. kris

          Ok I fully understand and the reason is that I live in Toronto, Canada. FHA is the copycat of our CMHC that insures 90% of mortgages. Hence, 6 banks in Canada (that’s all, just 6 banks) have no risk or assuming default losses, since the Gov (basically me) is taking the risk.
          Question: Legally is FHA exactly at CMHC? In Canada nobody can sue CHMC as far as I know. How about in US?

          1. Praedor

            When you are denied “legal” remedy, the state is clearly corrupt and no longer legitimate. You have recourse: burn the facilities to the ground. Burn their mansions to the ground. THAT is the most satisfying remedy there is.

  14. Lambert Strether

    Good question on “Why now”? It is too far from the election. But I’m not sure a meeting of state AGs would be enough, though. The fingerprints of the Obama administration are all over the incredibly sleazy, rule-of-law free implementation, but since the banks own Obama, and not the reverse, could there be some financial reason for the timing? Some part of the “pass the parcel” on securitization?

  15. Eric L. Prentis

    Barack Obama pretends to be a Democratic President, using Public Relations to the max. Let’s all feign voting for him.

    Please, where is a viable, progressive third-party candidate?

      1. Lambert Strether

        And I notice that Jill Stein proponents never cite any actual positions that Stein takes on matters relevant to the thread. It’s incredibly frustrating! I had a bellyful of “Check the website!” in 2008 and I don’t want any more of it. No massive copying of position papers, I need hardly say, or off-point trolling, but I don’t think a blockquote every so often would go amiss. For example, on this thread: Does Stein have a statement on the settlement? Or, like Elizabeth [genuflects] Warren, the liberal’s great hope for 2016, is she silent?

  16. Mr. Coughsalot

    Why this odd behavior by the AGs, the banks, and even more recently by the Fed?

    I’ll cough up three guesses as to why this is happening:

    (1) The target banks are still insolvent. The banks and Fed have warned that a larger/litigation-based remedy might create a 2008-style illiquidity event, a domino effect of fire and brimstone that would result in the end of civilization. However, a $25B remedy can be backstoped by the Fed without raising a red flag.

    (2) States are in desperate need of cash now, particularly CA, FL, etc. This provides short term cash in lieu of a possible long term windfall – if they win litigation, and they win inevitable appeals, and you assume the target banks still exist when the appeals are done in 3-5 years…

    (3) Political solutions for all – banks get some immunity, state governors and AGs get to advertise their huge settlements, and the Obama administration gets to simultaneously trumpet a $25B deal on the front end while the target banks funnel a small % of their newest bailout into SuperPAC $ for the 2012 election.

    The real question is not why this is so bad (we know its downsides) but what’s the alternative?

    Criminal prosecutions can disincent future behavior (and can still happen) but won’t fix the past, nor will they fix our continuing economic wounds.

    Civil litigation is long, uncertain, expensive, and subject to liability “shuffling” by target banks into subs that can go bankrupt.

    Federal programs to help at the main street level are hamstrung by congressional paralaysis and lobbying.

    States can’t do much as the worst-effected states are near bankruptcy.

    Basically, this is a terrible solution but is there really a better one?

    1. Lambert Strether

      You can’t have a housing market without the rule of law and based on forged documents. (Or, more subtly, you could view our current plight as a gigantic experiment to see if you can, with the homeowners as lab rats, the mortgage system as a maze, and the banksters as white-coated sociop- er, scientists.)

      That’s why the only way to “heal” the market is criminal prosecutions. Only in that way can the rule of law be restored.

      1. James Cole

        Is there anything in the history of our nation since 2008 let alone in the last year or so that would indicate that this particular “arc of history” is bending toward justice? All of the indications are otherwise. So, yes, we shall see what a housing market without rule of law is like.

      2. blitzen

        Lambert is right, and what’s more 1) everybody knows it, but 2) still no criminal prosecutions will be forthcoming. My best theory that fits the facts (such as I know them) is this — please correct me here if you can:

        1) The banking system is busted — kaput. All the viable money and credit are gone, the only question is who ends up stuck with the bill.

        2) All the actions since 2008 have served to prop up the corpse. Bailouts, QE, ZIRP — these are all means of nailing the parrot to its perch. Pump enough money into enough banks for long enough and maybe they can legitimately fake solvency when the black swan comes.

        3) We need a bank deal now because Greece and the Euro are about to fall over, the black swan “credit event’ will happen, everything gets marked-to-market and the without the deal the parrot falls over, nailed to the perch or no.

        0bama is doing his best to support those “savvy businessmen” because maybe if he does so for long enough new QE/ZIRP suits will get delivered before everybody notices that those emperors don’t have any.

        I’m happy to be corrected here. Regulatory capture also fits, but I think we might have an even bigger problem here.

        1. Praedor

          In the civilian world I am a scientist so I just don’t understand this crap. Pretending all is well by creating false fronts, throwing up rice paper walls and murals, cannot do anything to save the system and if it is, in fact, busted, there is absolutely no gain to going through contortions to make it seem it is OK. Nothing they do can prevent a flop if what you posit is true so it is inherently irrational and a waste of time and energy. When/if it all falls down not even the bankers will have anything to show for it.

          Desperation is not an answer and is not a valid excuse.

          1. LifelongLib

            If we funded science properly scientists wouldn’t have to spend so much time chasing funds.

            I can’t find the source of the quote, but some politician once said that when faced with an impossible situation, “delay, delay”.

          2. hyperpolarizer

            Do you know any actual scientists?

            They form my professional cohort. They are not Richard Feynmann types (and thank God for that actually) but they are actively engaged in the pursuit of their professions, outside of the pure pursuit of funding.

            Yes it’s harder and harder to get funded, but that’s just another example of our national misallocation of resources : Bankster yachts instead of more graduate students, postdocs, diffractometers, network analyzers, test-tubes, etc.

            I am a child of the Sputnik generation; I know what this country is capable of when mobilized.

          3. Lidia

            Praedor, I hear you, as I have a science background myself. But extending and pretending and collective delusions happen in the science/technology world, too: nuclear power is a great case in point. Just pick up any Wired magazine: it’s filled with delusional thinking. Don’t even get me started on “The Singularity”. A lot of scientists are autists and cannot think beyond the limited personal braincells with which they are fascinated.

            Given those initial defects, it’s still possible for “scientific” delusions to get corrected via the scientific method, but just as often that doesn’t happen, as logical processes get suffocated in their crib by issues of money and politics.

            Recently I have come to believe in magic, black magic. Money is magic. It’s not real, but it makes real people do real things: concrete acts of mutually-assured destruction that they would never undertake if there were no money in it. There is no force more universally Satanic or corrosive that I can identify.

            We would never take bottled water from point A and ship it to point B, then take water from point B and ship it to point A, if it were not for money.

            We would never throw out perfectly good glass bottles that we had expended precious and dwindling resources to make, if someone else didn’t engage in the “wealth creation” of trucking them away to the landfill and then selling us new bottles (or trucking them away and crushing them, etc.).

            You can talk about logic all you want, but with money in the picture, all logic flies right out the window. All logic.

          4. Lidia

            P.S. A couple of MIT Ph.D.-level biology researchers of my acquaintance signed up with one of those cryogenic services that are supposed to promise to keep you frozen until “science” thaws you out and fixes whatever caused you to croak in the first place.

            Good luck with that, is all I can say…

            What struck me in particular was that, being short on funds, they were going to opt for just the head freezing!

            Even without the idea of money, supposedly intelligent and “logical, scientific” people can be surprisingly dopey.

            We can’t even keep the roads paved, yet we’re going to expend energy on keeping lots of frozen dead people around for centuries? Even aside from the freezer burn question, it’s hardly a rational mental construct.

    2. Tim

      There is almost certainly some very interesting “details” of this entire matter that are not public. As the article noted, there is something VERY odd about the self-congratulations an ambiguous pronouncements when no one seems to be talking about what has really been agreed to.

      Even these days, AGs, the banks and the Justice Department cannot negotiate away private rights of action by homeowners or investors. If Bank of America illegally foreclosed on a homeowner, charged fantasy fees and/or negligently trashed the title of a home, the injured party will retain a possible cause of action no matter what the AGs and banks agree to.

      The AGs cannot unilaterally change the terms of investor trust agreements, mortgage agreements or take away property rights (potential lawsuit damages) without doing so through judicial process and paying compensation to parties (think eminent domain). Nor can banks agree to lower principal in loans sold to trusts without a right to do so in the trust agreements themselves.

      AGs can agree to forego civil actions and criminal prosecutions from past violations. They cannot agree to do so in the future unless of course they get their respective legislators to change the law in the states. They also cannot agree to magically transform MERS filings that do not meet state law requirements into conforming filings and thereby change the standings and relationships of homeowners and creditors.

      I have been perplexed for the last year and remain so about what the heck is even being negotiated. The fact that the parties have kept this wrapped in such a mystery is a cause for concern. I suspect that when the details do emerge, one side or the other will realize they have been snookered in order to generate a day of high-level political messaging (hoping the press and public don’t pay much attention that a deal never got done).

      The other possibility is that the agreement is a back-door attempt to take rights and property from individual investors and homeowners and making it even more costly for them to individually (or through class-actions) defend themselves and seek compensation for past and future wrongs.

      1. CaitlinO

        ” If Bank of America illegally foreclosed on a homeowner, charged fantasy fees and/or negligently trashed the title of a home, the injured party will retain a possible cause of action ”

        True enough but a family that has already put every bit of savings and, often, credit toward trying to save their home typically has nothing left to fight wrongful taking.

        Bank of America and its partners in crime have done everything you mention, are still doing it and WILL CONTINUE. They can’t foreclose without fraud due to their inability to establish standing. Their choice is foreclosure with fraud or no foreclosure at all, and my bets are on Door #1.

    3. Doug Terpstra

      You could say the same about rape, torture, and murder. Criminal prosecution won’t fix the past or the future so why bother. News: life prison terms, permanent disbarment/delicensing WILL absolutely disicent future behavior. Sadly, it may finally require severed heads in baskets to put an end to it.

      Funny how the “let’s look forward not backward” meme only seems to apply to pirates, robber barons, and war criminals, while the pot peddler or petty thief invariably lands in profit prison slave camps.

    4. hyperpolarizer

      Institutionalizing bank fraud as the official means of doing business in America is *not* a solution thank you.

      Basically you prosecute people going forward, some big time banksters do some federal hard time, and next time around they think twice before running a fraudulent process.

      Basically you prosecute to show the world that fraud is not an acceptable means of doing business.

      Otherwise ,,, well, welcome to the kleptocracy….

  17. jsmith

    I called it a few days ago when in a post I asked the question:

    I wonder what the original deal was that the banks gave Obama? $5 billion total? $10 billion?

    I thought that someone in the admin probably had nixed those numbers because it would just be TOO egregious of a giveaway and then listed a number of other events which had showed that in fact the credulity of the American people knows no bounds.

    I should have stuck with my original hypothesis.

    At this moment in history, there is no longer any limit to the levels the elite will go to further their agendas and no limits to the acceptance of the brainwashed mind of the serf.

  18. hello

    “However, the attorneys general are not experts in securitization, and benign-sounding language can have implication that they don’t appreciate. ”

    this is the most salient point, the AGs and even more importantly, their staff attorneys, are totally not on the same plane of existence as the bankers’ counsel.

    The AGs and their staff just want this over, so that they can go back to prosecuting violent felonies.

    1. aletheia33

      this is my guess also. how many of these ags are equipped to handle this kind of stuff? my state is very rural, my town still has its very own savings and loan, the financial culture is conservative relative to the boom states (so our housing market wasn’t hit as bad, that’s the up side), and we just try to tax the uber wealthy who have second homes here for as much as we can. the idea that my ag’s office would have the background required to even call the ubercriminals on their games was probably far-fetched.

      it’s widely acknowledged that there aren’t enough journalists with the right education to report accurately on the great finance ripoff. yves is a rare bird. how many lawyers who aren’t already complicit are out here in the hinterland ready to take on the ones who are?

      and i in my innocence thought my country lawyer ag might be able to stand up to these guys on the strength of courage alone. i was dreaming.

  19. FUBAR

    I have voted for a Democrat for President since Jimmy Carter. The way Obama has totally sold out is just disgusting. I will not vote for him again. I also will not vote for the Republican candidate as he will be even worse. I have lost my country.

    1. facethemusic

      Agreed. For the first time in my adult life, I will go to the polls in November and not vote for the Dem. candidate for President. I obviously won’t vote repuglican either. If OCCUPY decides to make a stink at the Charlotte Democrat National Convention, I’ll try to be there.

      At least Bush was honest when he said “my base is the haves, and the have mores…”. Obama would never be that honest.

  20. briansays

    consider that most AG’s are not great lawyers with limited time ever actually practicing law
    they are politicians
    termed out in the state legislature
    looking to move up to a statewide office with the next step governor or senator

    do you think beau biden became AG based on his lawyering skills or because who his daddy is?

  21. Bravo

    Seems to me that the premature announcement was a slap in the face to the 15 AG’s who are indicated to have been having second thoughts about their participation in the settlement. If any of them have a backbone, perhaps they now have more leverage than ever before, as how is the administration going to spin its way out of a deal that doesn’t get their participation now? A pretty arrogant move on the administration’s part that puts AG’s in a particularly bad light, as if details and AG sign offs shouldn’t really matter to the public on an issue of this magnitude?

  22. Blurtman

    “The Charlotte bank had to be more precise than politicians because it is subject to SEC regulations…”

    Ha, ha, ha, ha,… Oh, that is too rich!

    1. leapfrog

      Yes, that is hilarious now that you point it out. That sentence had caught my eye, but I didn’t stop and think about it during the original read.

  23. Mr

    So is Harold Meyerson — who I generally find to be a very good reporter and well-intentioned left-wing writer — just being dense in this American Prospect article? It’s not probable that all this investigations will bear fruit?:

    “In the division of labor on the coming investigation of bank abuses, Harris and Masto will likely take the lead on fraudulent and lax origination—more of which took place in their states than anywhere else—while Schneiderman, Biden, and the Feds focus more on the misrepresentation and fraudulent marketing of mortgage-backed securities and derivatives. The mansion of financial fraud has many rooms, and since Thursday’s deal did not seal them off, Harris, Schneiderman, U.S. Attorney General Eric Holder, and Company will be looking into them in the months to come.”

        1. enouf

          Otherwise; LIVE version at 8:00 EST,

          (not that it matters now anymore, heh).


          P.S. I guess i’m getting sick and tired of even the single last bastian left for viewers to actually call in, ..and even though the pols/pundits are highly adept and quickly avoiding any real critique and redirecting back to their own ‘talking points’, (sickening really — heck, i’m sure many callers are paid $$$ via the KOCH foundation-of-greed) I’m more and more upset and cynical at the ignorance out there. (Though some gems do finally make it through, and as i said, some/many calls are intended PsyOp driven).

    1. Yves Smith Post author

      Three years out of four, American Prospect is a pretty decent “progressive” magazine. The fourth year, it provides plausible-sounding “progressive” commentary in support of the Democratic Party presidential nominee.

  24. Rex

    What’s all this quibbling about the deal not actually being sealed with ink? Easily resolved. They just need to set up JERS (Justice Electronic Registry Service).

  25. JEHR

    Yves, thanks so much for your integrity and your willingness to go on numerous programs to deliver your message. I heard you on the CBC on Saturday and I thought you were wonderful. It is so sad that there are so few voices speaking up about scams that always seem to favour the banks.

  26. Susan the other

    There is a reason for all the confusion and equivocation and stonewalling. It would be lovely if the banks knew the writing was on the wall – that they are terminal and in great pain, and all this bluster is just a morphine drip. In 5 months they will all be taken over by a nationalized system. How else will they get out of all the pending criminal charges? QUESTION: Under what conditions can documents and records be sealed for 75 years besides an assassination of a president?

  27. BondsOfSteel

    I think what we’re seeing is another example of ‘governiness’. Similar to ‘truthiness’, it’s about emotions and perceptions and not boring things like facts.

    We as a people have gone beyond the need of actually having to do things. We only need the agreement that in principal things should be done. It’s the principal that counts in governinessing.

    The beauty of governinessing is that without details like laws, your hands are never dirty! If someone breaks a principal… shame on them! You however don’t have to get involved. It’s not your fault you can’t enforce principals…

    1. facethemusic

      Rather than law enforcement, the Obama task force will produce law enfarcement. Talk about it enough til it drops out of the news, and bury it in minutae – Obama’s plan from the start. His co-optation of Schneiderman was artful, you have to admit…

  28. Gil Gamesh

    The consistency here is truly impressive. Fraud in the origination of mortgages, appraiser fraud, fraud by the securitizers and rating agencies, fraud by the firms that peddled toxic securities to pension funds, foreign banks and investors, and other pichons, fraud in the foreclosure process, and now fraud in the “settlement” agreement. It takes a certain genius, and confirms my assertion about the only things Americans are really good at today: blowing up brown peoples and committing fraud on levels never-before-seen in history. Gives you a lump in the throat…..

  29. minty

    well there is still time for we the people to express our extreme dissatisfaction and really hammer home the message that we run this country and the banks provide a service to us

  30. LillithMc

    Cheating gives an advantage. Everyone knows that. Usually people will look the other way. How long did ENRON run with encouragement from BUSHCO? Because cheating was ok, the green light went on in the mortgage industry from the bottom to the top. “Organized” real estate knew. Once they sponsored workshops in “ethics”. Next it was hyper-marketing. The last workshop I attended taught a scam that had sent some local agents to jail, but obviously the Realtors’ community had not read the paper or didn’t want to cancel what seemed to be a quick-buck seminar sponsored by a title company. This settlement is politics. If the banks paid to rewrite the loans to match the local underwater markets or compensate for their fraud, they would be bankrupt instead of cooking the books. When we see someone with integrity telling the truth, it is so amazing we become especially attached to people like Yves Smith. Thank you Yves.

  31. Jackrabbit

    My guess on the timing:

    1) The election is NOT too far off. The closer it is to the election, a) the more the deal gets scruitney, and b) the more a settlement seems “politically motivated.”

    2) This seems to dovetail with the big push to paint a rosy picture of the economy. That push could be

    a) the latest exercice in confidence building OR

    b) an effort to get ahead of bad economic news that is (almost) surely coming due to the European mess and a possible War. In this scenario, when the economy does tank (unexpectedly!) they can blame that failure on factors outside their control, as in “hey we were doing fine until….”

    1. Jackrabbit

      After some thought, I would guess that while the above may have played some part, the possibility of AGs splitting off – as described by Yves – would probably have been the prime factor is pushing for a quick agreement and premature announcement.

    2. Jackrabbit

      Thanks. I think I described some important factors at play but after some more thought, I decided that the prime factor would probably still have been the fear of AGs breaking off (if Yves is correct about that becoming a real possibility).

  32. myles

    How can this article be sent to all the major international newspapers, to AlJazeera, RT, the UN news, to all major media that could put pressure on American media to publish this articles, thus putting pressure on the AGs to read this article and find a loophole to weasel out of this sham agreement???

  33. kris

    – There is no agreement
    – There is a PR template
    – Obama chants against the banks
    – Obama helps the banks
    – The state practically OWNS the banks
    – Banks CANNOT exist without state’s support
    – Hence state is the banks and the banks is the state
    – Either bank takeover of the state, or state takeover of the banks, or pure merging of banks and state.
    – Foreclosure means that the state/bank is foreclosing on the people.
    – In USA the congress has the power but the courts have the power (califournia homosexual marriage proposition 8)
    – The current president openly broke the constitution when he forced the funds to take a 48% loss towards Chrysler, GM. Example, Indiana pension fund.
    – Hence constitution can be broken.
    Anybody can add to or omit from the factors.

    Pardon my question: WHO THE **** HAS THE POWER IN USA?

    1. SidFinster

      While I can understand why you are complaining about the violation of the absolute priority rule in the Chrysler bailout, the absolute priority rule is not contained anywhere in the Constitution.

      It is set out in the Bankruptcy Code. Big difference. It also does not mean what you seem to think it does.

  34. rps

    The chirpy robomessenger at CNN today announced that people who lost their homes in fraudclosuregate will receive $1000 to $2000 in compensation from the deal! The onus of course is on the victim to produce the mortgage documents proving they were scammed by the banks. Hey!, who gives a rats ass about the stolen property and lost equity. In the words of GWB, “Now go Shop.”

    1. jawbone

      HUD Scty Donovan was on a public radio program after the announcement and stated that the low payouts would only go to people who had experienced “difficulties” in attempting to negotiate with the banks, such as lost paperwork, need to repeatedly resend items.

      It’s about enough to cover all the certified mail expenses some people had to pay out, eh?

      These Powers That Be types and their minions really do think the little people are dumb, gullible, or just beaten up enough to not take real action on this.

    2. LucyLulu

      From the press release:
      “Over the next six to nine months, the settlement administrator, attorneys general and the mortgage servicers will work to identify homeowners eligible for the immediate cash payments, principal reductions and refinancing. Those eligible will receive letters. ”

      In other words, the banks will decide who gets money and who doesn’t.

  35. pdx

    For cynics like me, this is hilarious. I read U.S. feminist blogs, and the majority of which are run by Obama apologists. He needs women’s votes in the election, and he’s frantically trying to divert our attention from his cave-ins to the anti-contraception crowd so that he can spin his cave-ins to the banks. One of the big feminist bloggers who’s falling for this said something like, “Our great elevnen-dimensional chess player set this brilliant trap for the anti-contraceptive crowd, I know because the PR flaks said so when I jumped on the White House call.” Yep, that explains it, darlin’. You’re part of the in crowd.

    What a clusterfuck.

    1. different clue

      There is a feminist-run blog called The Confluence which is very Obama-condemnatory. It is called The Confluence and it can be looked up and read.

    2. sleeper

      Anybody notice that the sell out to the banks was closely followed by both the contraceptive and the nuke plant permitting ?

      Is the media (such as it is) being played ?

      After all the contraception issue is a wedge issue which quickly polarizes each point of view to it’s base of folks who are very unlikely to change their minds.

      Red herring anyone ?

      1. pdx

        Yeah, it’s a red herring. Also, it’s partly “Let’s you and him fight.” There IS some eleventy-dimensional chess involved, but I suspect that’s an afterthought that’s not going to play out as hoped.

        He’s changed? The problem with some of the feminist bloggers is that they don’t see any need for Obama to change. Never did. Literally all you have to do–all you ever had to do–is merely mention FISA or Geithner to bring on sneering accusations of racism.

        As to The Confluence–well, Naked Capitalism has spoiled the lighter fare for me. I’m a rabid feminist, but I read the “serious” mainstream feminist blogs mainly for amusement, particularly to watch them pretzel themselves into defending Obama.

        1. Praedor

          How can you stomach that? I have quit frequenting so many blogs over the last 3 years as it became more and more evident that Obama was EXACTLY what he was seeming to be (a Republican, a sellout, corrupt, ineffectual, a figurehead only, etc, etc) yet the sites, out of cognitive dissonance I assume, went through the most painful and repetitive contortions to apologize and rationalize it all. They STILL support that f*ck in the White House and will STILL campaign for him and will STILL end up repeatedly disappointed, angered, baffled, etc, go through contortions to rationalize it…rinse and repeat.

          I cannot stomach it. It angers and disgusts me so I cannot obtain amusement at the painful, pathetic contortions. It is too much like a cheap circus freekshow.

          1. Lidia

            It is really painful. I can only think that it’s because we are all trained to think in dualist white-hat-vs.-black-hat terms. That if a political party stands for one thing, its opponent stands for the opposite. The idea that Rs and Ds can be fighting each other so (apparently) viciously and yet not actually wanting to arrive at anyplace different is a third option that is too horrible to contemplate and to fully digest.

            To fully grasp that (in George Carlin’s words) “they don’t give a fuck about you, at all… AT ALL” is painful. The teabaggers are similarly confounded and demoralized, feeling their own brand of pain at having Mitt Romney rammed down their throats. It will remain to be seen how energetically they react to this (Santorum? Ron Paul?). It’s unlikely they will be able to make their voices heard, either (but they lived by Diebold and they will die by Diebold, so I’m not feeling all that sorry for them).

            I used to scoff at my RWNJ sister’s harping on FOX’s old Obama=Messiah talking point, but on some level it’s true that people do look for paladins to champion them. RR appeared as the right’s paladin, which is why they can’t get enough of him even after he’s dead. Obama was supposed to be the left’s paladin, a sort of Kennedy-esque figure, but he’s not doing quite so good of a job at keeping up appearances as the more facile RR managed to do.

            These are tropes that go beyond policy and which defy logic, appealing to emotion instead. We don’t want to think our chosen paladins are actively working against us. It means that everything we have ever learned about our country and our society is wrong, and that all our friends and families are wrong, and that—for most of us—we have made the wrong choices all along (taking out debt to go to college and buying into ever-more-fickle credentialism, going into debt for the house in the suburbs and its requisite two cars, relying on corporations for jobs, food, water, etc.). It means that there is -effectively- no room for optimism in our lives, except for what we can eke out in personal realms not subject to government and corporate control (unfortunately these realms no longer include our bedrooms or our once-private correspondence). So yeah, anyone who seems to be even marginally “on our side” (whether that side is right or left) is going to amass desperate and illogical followers.

      2. Damian

        your bunny has a good nose !

        they could have announced the contraceptive deal at any time – there was no pressure – especially why do it with CPAC in session?

        this was ALL diversion for the bank settlement not to be discussed on sunday news

        there is nothing in the system that isnt being played for propaganda

        bank fraud has been institutionalized as an approved and sanctioned business tool

        complaining is a waste of time !

  36. jawbone

    Re: BillyBob’s question above, does anyone have an answer? Are the AG’s free to note that the end agreement does not match what was supposedly agreed to in principle and thus they are free to tell the banksters to shove it?

    Which does not address whether they would dare to do so, of course….

    BillyBob says:
    February 11, 2012 at 9:15 am

    The star turns are unfortunate, and Schneiderman is especially caught in the net, but is there any legal reason that state A’sG can’t refuse to sign final versions of the pending dog’s breakfast?

  37. Virginia

    Question – How can title companies find clear title history when chain of title issues are in question? If one buys a house from a bank (that has forged documents), it seems the title search would find this and abort the sale. How does this work?

    1. CaitlinO

      We’re about to begin looking for our retirement home and have told our reader we won’t buy without a title audit. I thought originally that having an independent title search performed would do it but now I’m not at all sure. I guess what we want is more of a forensic title audit but am not sure what kind of company provides that sort of thing.

      Any suggestions?

      1. sleeper

        In some areas retirement property is being sold as “with clear title” which of course is pretty much a impossibility.

        Let the buyer beware !!

        1. Praedor

          You buy the home, you buy a gun. You shoot anyone straight through the throat if they approach and try to serve an eviction notice. That is how the buyer protects his/her rights.

          1. aletheia33

            above, you said burning mansions is the most satisfying action of all. and now it’s shooting from one’s front porch. i can see how such thoughts are appealing. however i doubt that those who have actually rioted in their own neighborhoods have found it particularly satisfying. and i can’t imagine in what universe it would feel anything but profoundly disturbing to shoot someone, especially someone unbarmed who is not physically attacking you.

            are you basing these statementson your personal experience of doing these things?

            have you considered nonviolence as a strategy? if so, why do you reject it?

          2. jonboinAR

            To follow Aleithia33 (sp?):

            Especially when the eviction server is just some poor hired schmuck such as the robo-signers are/were. You sure, in that instance, aren’t shooting who’s really responsible for your distress. Now you’re going to prison so you’re going to lose your home anyway. But those who get that notice of eviction are aware of all that so they do none of that briefly satisfying suggestion. So what do we accomplish with remarks such as the original but rather impotently blow off steam?

            It still leaves the question: what’s the individual to do about this travesty? Nothing, without organizing with others.

      2. Lidia

        Caitlin, I am in the same boat, and what I am going to try to do is avoid houses which have been mortgaged since (let’s say) 2000. What I’m hoping is that older and more boring mortgages may not have gone into the securitization hopper.

        Is that an incorrect assumption, guys??

        If you find an inexpensive older fixer-upper it may even be paid off if the family is trying to sell it out of an estate.

        I’m also going to investigate deeds. I see a lot of “quitclaim” deeds listed on properties, and from what little I know that seems definitely something to avoid because it only turns over whatever interest the seller MAY HAVE HAD in a property, which could turn out to be none, as far as I understand it.

        After that, possession is 9/10ths of the law. I can’t seriously see some financial entity unknown to me coming after my house, when there are houses littering the landscape that no-one wants. Houses are liabilities, especially if you aren’t living in them, and the market hasn’t reached bottom by a long shot.

        1. kris

          You’ve got some new perspective I may have thought in the past. Please, keep entering your input. Thx a lot.

          1. kris

            Crap. I should check spelling.
            You’ve got some new perspectives I haven’t thought in the past. Please, keep entering your input. Thx a lot.

  38. kris

    The more Yves explains the situation the clumsier it gets, since she sheds light on many and many factors at play. Too many parties with known and unknown powers. Chris Whalen twitted that the banks have already stolen that money.
    A “deal” may actually happen, but I see about 1 trillion lawsuits against it.

  39. aletheia33

    FWIW, and FYI, my state assistant ag continues to reply to my emails, as shown below. i find the disconnect between what i’m reading on nc and what this guy is saying difficult to assimilate. i hope yves will uncover more detail about the individual ags and why they failed to negotiate.

    i don’t know whether to think this person genuinely believes what he’s saying, which means he’s incompetent, or is so concerned with spreading propaganda that he feels it’s worth his time to keep writing me back in person. i’m sure i’m pathetically naive about this, but i think he genuinely believes his office has done the right thing and wants to convince me of it. after my initial contact, he spent at least half an hour, maybe more, on the phone with me going through the details of the settlement trying to explain to me why it is the best deal he thinks can/could be obtained.

    how am i to interpret this behavior?

    my note to him:
    [first name of my assistant ag],

    sorry to bother you again. when i said i would leave you alone from now on, i didn’t realize that the settlement actually has not been finalized.

    see the below. at this point, i merely would like you and mr. [my sate ag] to know that someone in [our state] is paying attention. i hope some day to understand what motivated so many states’ attorney generals, including mine, to go along with this travesty of justice. how much of these ags’ capitaluation was due to lack of courage, how much to the $$$ directly coming into ag coffers, how much to an understandable inability to master the financial ins and outs well enough to negotiate with a full deck.

    the so-called 50-state “investigation” never occurred. tom miller ag of iowa promised: “people will go to jail.” this investigation was the only remaining hope u.s. citizens had of seeing justice done for the crimes and the bailouts. now, instead–another bailout, this one carefully disguised.

    as i’ve mentioned to you earlier, i’ve been deeply concerned about the current state of our democracy and our society. i am now more deeply disturbed to discover that in [our state], which i had believed was one of the most strongly democratically minded (as in democracy, not democratic party) states remaining in the nation, no longer appears to be holding that line.

    the united states used to be a place the rest of the world looked to for some standard of justice and equality. where will they look now?

    the anger will escalate. our society is in a dangerous situation.

    as a private citizen, and with no access to the facts of what happened in the negotiations behind closed doors, i cannot say that i would have had the courage, in mr. [my ag]’s shoes, to stand up for justice and what’s right. but as he is a public servant, i expect him to have that courage.

    with all due respect,


    below: this morning’s report from yves smith’s blog naked capitalism. i hope you will take the time to read it and forward it to mr. [my ag], as you kindly did the one i sent you earlier, for which i am most grateful.

    his response:

    [my name]—I respect your point of view. The federal/multistate settlement was not perfect, by any means; and it has its critics—not all, by the way, of the opinion that the settlement was too lax on the banks. (I spoke with a [citizen of our state] last night who felt that the federal and state governments had unfairly punished the banks!)

    But some points are worth noting, regardless of how a citizen views the outcome of the negotiations. One point is that the abuses of the servicing companies—from which most of the harm to [residents of our state] stemmed—will end as a result of the detailed, enforceable standards set out in the settlement. The second point is that the settlement did not release the banks from liability for key claims—criminal, private, securitization, and MERS, among others. And the third point is that if [our state] had declined to sign onto the settlement, it is highly unlikely that we would have ended up with anything near the monetary or future-conduct relief we obtained through negotiation, and any recovery would have been delayed by many years.

    I think the Center for Responsible Lending, a fierce advocate for American homeowners, had it right when it summed up the outcome of the negotiations this way: “AG Settlement: Not Perfect, but Significant Reform of Mortgage Servicing.”

    Thanks for your thoughts.

    Assistant Attorney General

    1. Murky

      Your state AG said:

      “I think the Center for Responsible Lending, a fierce advocate for American homeowners…”

      And that got me to laughing out loud. In Gretchen Morgenson’s book, Reckless Endangerment , the Center for Responsible Lending is portrayed, rather, as a lobbying group for the mortgage industry. Consumer protection is not their first priority.

      1. aletheia33

        request for attribution of a quotation from a statement claimed to have been made in woodrow wilson’s time is a matter of historical scholarship and validation relating to probably fabricated material that is being widely circulated as fact.

        a present, practical concern to protect one’s own identity on a widely read blog is a different matter.

      2. aletheia33


        thanks and no thanks. digging a little deeper. (as i’ve heard it said, “it’s really hard to know who to trust these days.”)

        the site you direct me to,, says it was created by the Center for Consumer Freedom. Here is the latter’s self-description:

        “Founded in 1996, the Center for Consumer Freedom is a nonprofit organization devoted to promoting personal responsibility and protecting consumer choices. We believe that the consumer is King. And Queen.

        A growing cabal of activists has meddled in Americans’ lives in recent years. They include self-anointed “food police,” health campaigners, trial lawyers, personal-finance do-gooders, animal-rights misanthropes, and meddling bureaucrats.

        Their common denominator? They all claim to know “what’s best for you.” In reality, they’re eroding our basic freedoms—the freedom to buy what we want, eat what we want, drink what we want, and raise our children as we see fit. When they push ordinary Americans around, we’re here to push back….

        –Who funds you guys? How about some “full disclosure”?–

        The Center for Consumer Freedom is supported by restaurants, food companies and thousands of individual consumers. From farm to fork, from urban to rural, our friends and supporters include businesses, their employees, and their customers….

          1. Murky

            Aletheia33, it’s ok by me if you don’t like the link i provided. I do trust the other link to Gretchen Moransen’s book; describes the Center for Responsible Lending blunty as a mortgage industry lobby.

            You can believe what you what. Giving up on trying to persuade you of anything.

    2. Doug Terpstra

      You wonder whether you AG is incompetent or dishonest. I’ve come to believe that all politicians in this pseudo-democracy are fundamentally dishonest (they present a legally-notarized bill of sale for their soul in order to rise above the office of dog-catcher) and a good many are incompetent as well (consider shrub or any current GOP buffoon). So your question is probably not either/or.

      The spectacular craven cave-in of all US AG’s is truly mind-boggling. It reveals starkly how utterly beyond reform the US system is and hence why the Occupy movement cannot codify a reform platform, nor should it attempt to do so. All of the real values and principles on which the current system is founded are ultimately dysfunctional and wicked, beyond redemption. Real change requires that all of the values and all of the people vested in them that must swept out. There’s no hope or possiblility of negotiation.

  40. rps

    I thought I’d never agree with Norquist’s (what I had once considered an idiotic) comment of “I don’t want to abolish (federal) government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.”

    The federal government kneelers have intervened, defended, mismanaged, deregulated, obfuscate the truth, and replenished the financier robber barons coffers with “our” hard-earned taxpayer funds. They have vaporized the “Rule of Law” and unilaterally detained the citizens of this land with the “(Un)Patriot(ic) Act amongst many other egregious anti-american and anti-Republic actions . They are what my grandfather would’ve plainly stated, “they’ve gotten too big for their britches.”

    To quote Patrick Henry, “The Constitution is not an instrument for the government to restrain the people, it is an instrument for the people to restrain the government – lest it come to dominate our lives and interests.”

    1. different clue

      But that is not due to their size. That is due to their intentions, goals, and social class allegiance. If they would have used their size to enforce laws/rules/regs on behalf of we who pay their salary; then we would have benefited from their size. “Size and reach” do not per se disturb me. Use of their “size and reach” to benefit their social class comrades and outrankers is what bothers me.

      The government is doing exactly what the Norquistians have worked long and carefully to get the government to do.
      It is enriching the Norquist class with our money.

      1. Doctor Brian Oblivion

        I would only add that the reason why folks like Norquist are so intent on scapegoating the government for everything any chance they get and advocate the bathtub option is that unlike private tyrannies (eg, corporations) state institutions have a fatal flaw that makes them unreliable: there is always a risk that they may be responsive to the public.

        When state assets and institutions are privatized for reasons of “market efficiency” they are dismantled or otherwise made unresponsive and unaccountable to the public… problem solved.

        The IMF has routinely made dismantling public / state institutions a condition for receiving much needed loans as well as legalizing capital flight, a bit like what is being demanded of Greece. With neoliberal economic “reforms” in place the outcome is much like what happens when one throws a drowning man an anchor. Bye bye.

      2. jonboinAR

        I think it’s ’cause “we”, in general, don’t pay close enough attention while “they” do (It helps them that they can pay people to pay attention for them. For us it might be a little harder work.)

    1. CaitlinO

      Yep, that’s what the world needs. Another FIRE product that can be unloaded on the default and derivative markets.

    2. skippy

      Lambert, I think your describing the currant system as it is, not a possible refinement of it.

      Skippy… every human being… is seen as a income-stream / cash flow magnifier… number thingy.

    3. just me

      You know, you’re going where I’ve been kinda wondering. Why don’t corporations just BUY our votes? Protected speech, innit? Citizen’s United straight up.

      1. psychohistorian

        You would not like the price for utter slavery.

        They have leverage in more ways than one. One police person with the right tools can control quite a few of us.

        1. different clue

          Can one police person with the right tools make us all go shopping if we decide we just don’t want to go shopping for a while? Can one police person with the right tools make a million people who would rather pay with cash than with a credit card . . . pay with a credit card instead?

          Can one police person with the right tools stamp out a diffuse leaderless economic insurgency composed of tens of millions of people who have decided to massage and direct their getting and spending activity to attrit, degrade, and exterminate certain iconic bussiness entities and social classes?

          1. LifelongLib

            I can imagine a situation where (in the name of law enforcement/national security, say) everyone was forced to use a credit/debit card rather than cash.

            I can imagine a situation where in many places some outfit like Walmart is the sole retailer for most everyday items, and bartering (which might be the only alternative) was restricted in the name of product safety.

            Unfortunately the answer to your questions may well be “yes, they can”.

          2. Lidia

            In fact, the “left-wing” government of Goldman Sachs alum Mr. Romano Prodi did indeed propose to make cash transactions illegal over a certain amount. Berlusconi (another thief, so don’t get the idea that he’s any great shakes) fended that off, but now that bankster Mario Monti is in charge, they’re back to that again.

            Cash transactions over €1000 are now illegal, and that may be reduced to €300!!

            zero hedge wrote about this last summer:


            Some people have old-fashioned bearer passbook savings, and those with more than €1000 in such accounts must transfer the excess by March 31st or have it confiscated (ka ching!).

            This is all behind the do-gooder facade of “battling tax evasion” but it’s just another burden on the little people: the real tax cheats are the ones running the boondoggle in league with the banks.

            They want to force every plumber and housecleaner to carry around a credit/debit card machine. The banks want their percentage of all these transactions, not just the gov. It’s similar to the food stamp debit-card scheme being run by JPMorgan.

            The telephone companies are getting in on it, too, as there are now lots of funky payment schemes using the ubiquitous cell phones, which I haven’t investigated. I try to stay as far away from these things as I can, although we did sign up for a pre-loaded cash card for use online when my US card wasn’t accepted, although that got complicated quickly, evolving into having to use a special separate PIN generator gadget that they sent out (imagine getting the millions on that contract), and now they’ve rigged it so that you cannot make a payment with the cash card unless you have a cell phone (they send you a transaction PIN SMS to your cell phone number, which you have to receive and then enter).

            No cell phone? (I don’t have one but my husband does)
            No cash card for you!

            The Cash Nazis.

            They can and will make life unmanageable for those who don’t buy in to their new control systems.

            On top of this, Italy always seems chronically short of cash. Cashiers are petulant and agressive when forced to hand out change: they want you to furnish them with coins. I’ve always thought they just didn’t want to pay for the actual minting of the objects.

            Just a couple of weeks ago, I wanted to take out €500 and the postal-bank teller negotiated me down to €300: they were running out of banknotes (this is apparently “normal”).

          3. jonboinAR

            Didn’t that Bernays fellow discover that one ad agency with the right campaign can make a lot of people do as it wishes while they all think they’re doing it of their own free will? And haven’t ad campaigns and political campaigns and parties been following his model ever since?

          4. different clue

            “Yes they can” ? Maybe for a while. And not quite yet in any case.

            So millions of people can certainly use cash/checks not credit as much as possible in the meantime and attrit the credit pushers as fast and hard as possible. People who use cash can start recognizing eachother and learn which of eachother they can trust. That knowledge and trust can be the basis of Patriot Cash Markets (which the authorities in this scenario would call Illegal Black Markets). Meanwhile also, those people who can do so . . . might start accumulating years of consumer storables and durables for slow consumption over time as they need these things. Multiyear supplies of preserved food/grain/honey/oil/etc. A lifetime supply of socks/shoes/razorblades/toilet paper/ soap/ etc. The things you don’t need to buy with the GoverCard later because you bought them with cash sooner are the things you don’t depend on your GoverCard for at all. And people could use these things for cash-equivalent barter, along with bartering work, time, etc.

            So if you imagine the Forced GoverBanCard transactions future, why not imagine and work out how to mitigate and subvert it starting now?

          5. Lidia

            different clue, the stockpiling of hard goods is certainly not a poor idea. Choose your items carefully, however. A lot of things are less durable than they might seem.

            My mom is still using laundry detergent she stockpiled during the inflationary 1970s, and it don’t work so good anymore. Plastic bags and plastic wrap have disintegrated. The ancient canned soups I got her to toss long ago, although (???) I guess you’d never know unless you opened ’em whether they were edible or not. Even “back up” frypans corroded. Entropy affects all.

            Whole grains seem pretty cheap and easy to store, although I’m not in a position to do so at the moment. Non-electric tools will always be useful to someone.

          6. different clue

            (Reply to Lidia, actually . . . )
            Thanks for the true stories of what did and did not store well over how long. We need more such genuine reports from the field. In my experience, cans of tuna fish have remained good enough to eat after 4 or so years. (I buy a bunch on sale and slowly eat it down till the next sale). Canned sardines, kippered herring, etc. last for several years. So one can always prebuy a couple hundred or several hundred cans of something you KNOW you like on supersale and eat it down over time till the next sale. Canned vegetables, many things. If one is really afraid of the forced GoverBanCard Future, one turns money into semi-storable food for long enough to withstand a government “anti-cash” seige and hope the last of it doesn’t go bad. One doesn’t even hope to boycott the GoverBanCard altogether, only to severely minimise one’s exposure to it.

            Many gallons of bottled alcohol as a trade good. Toilet paper, etc.

            Also, socks should last for decades and so should shoes if periodically oiled up and otherwise cared for. Cast Iron skillets last for decades if periodically used or at least re-seasoned. Stainless steel pots/pans/pressure cookers/ etc. Lifetime supply bought with real money.

            Also keep cash hoard for spending in the Patriot Cash Markets of the forced GoverBanCard future.

          7. Lidia

            P.S. re. shoes. I was once a big shoe aficionado, so I have many lightly-worn pairs ten years old or more.

            About half of them have “issues”: the Vibram soles of a pair of Timberlands completely disintegrated in storage; many pairs of leather shoes have had their plastic linings disintegrate although the rest is fine (women’s shoes, even expensive ones, are rarely leather-lined); on a couple of others the glue failed or began to show through the leather in horrid squiggles (again, not a cheap pair but rather expensive). One fabric pair I really liked which was my “go to” pair for certain things ended up sticky and oozy all over from the glue that had bound the fabric to the inner/structural parts.

            If you are talking about all-leather men’s shoes you might do ok. Probably a better idea to take a shoe-making class, though.

          8. Lidia

            different clue, our answers crossed. You mentioned toilet paper twice. My husband doesn’t use toilet paper: we have a bidet. I can do without TP in the summer (refreshing!) but in the winter I’d rather not be so wet and chilly (I don’t like to have to wait for the hot water to get up to temp.)

            Americans are pretty obsessed with TP. My mom had a big big stash of that, too. It’s rather expensive here in Europe, that’s for certain. Instead of bulky paper towels and Kleenex, I would stock up on lots of cotton and linen dishtowels and handkerchiefs you can wash and reuse. Those might be good for trading.

            In a future house I’m planning, I want to rely on a “humanure” system. It will be great for the garden (perfectly safe if handled correctly—Google it!) and I will be So Happy to get rid of conventional bowl plumbing (there’s always a leak neither I nor the plumber can get rid of) and all the caustic chemicals.

          9. Lidia

            different clue: hoping not to abuse the thread further, I think you might be interested in the ideas put forth in Thomas Greco’s book, which I believe is called The End of Money.

            He rightly calls for a popular clawing back of the “credit commons” which private banks have unduly monopolized to their sole advantage for the last few centuries. One of his phrases that stuck with me is (paraphrasing) “we give our credit to the banks, and then we pay them to lend it back to us.”

            People can do all sorts of ingenious things without hard cash besides straight barter: they can keep running accounts; they can come up with local currencies, company scrips or personal IOUs. [There’s an Italian comic film called “Il Cambiale” (the Promissory Note) which traces such a note from one farcical situation to the next, from the doctor to the baker to the prostitute, only to end up (I believe) in the hands of the original issuer. Cambiali and other improvisations were very common in Italy even into the 1970s and 1980s. Newspapers and candies were also used as currency.]

            Or people can just behave in a neighborly fashion among trusted groups: giving where needed knowing that they will receive in return when they might be in need. It doesn’t have to be an immediate exchange right that minute. This is how the world works already in various places and in various aspects. You might also like the Charles Eisenstein book “Sacred Economics”.

            It’s not going to serve us in anything more than the very short term to hole up with goods and try to enact the kind of clean, no-further-commitment transactions we have been used to. We are going to have to make messier exchanges that require more trust, since the private utility we suffered to exist, in part because it purported to manufacture and produce standardized pellets of trust for us on an industrial scale, has utterly failed.

          10. different clue


            Thank you for this. Some or all of it could be very useful especially combined with other things and approaches as well.

            Indeed, holing up with goods won’t serve longer than a short term. But that may be a short term bridge and time-buy while the other things are understood and new habits and methods learned and applied for the longer term. Much as a lifeboat is no good for a long sea voyage but is very necessary to escape the sinking ship and live long enough maybe to reach a better ship or dry land. (It was a suggested response to the threat of a theoretical government suppression of cash-use anyway.)

          11. enouf

            Two quick notes, but pertinent notes about all this storage/holed up;

            a) be wary of the 7-Day storage limit rule (but don’t follow it) as set forth in our great recent NDAA agreement; You can easily be labelled a tewwowist and held in Detention, indefinitely–military, or otherwise.

            b) Precious Metals; gold, silver, copper, …others even — as your precious Ca$h of phoney-funny-money; Federal Reserve notes will be useless/worthless eventually.


  41. Brooklin Bridge

    Frederic Leatherman, see here, argues that Obama is desperate for campaign funds and that the big banks turned off the spigot. The settlement fiasco (with no written terms) is simply Obama trying to turn it back on. The AG’s caved because they simply didn’t have the resources for more than bluff.

    1. Praedor

      Nice article. I would like to point out the statement: “For one thing, even the government acknowledges that a lender typically benefits when ways are found to keep a home out of foreclosure — a lender loses an average $60,000 on every foreclosure, according to figures the federal government disclosed in connection with the settlement announcement.”

      I want to get a movement started as a corollary to the Occupy movement’s occupation of foreclosed homes. I would like to see a concerted effort by those being foreclosed on to ensure that banks lose MUCH more than $60,000 on every foreclosure. Those under the gun of foreclosure should simply walk away. Quit paying, flip a bird at the bank and walk away…but not before gutting the interior of their foreclosed home. Demolish walls, totally wreck wood flooring, break toilets and sinks and tiles, ruin carpet. Stripe electrical wiring (copper) from the walls. If there is copper plumbing, strip it out too. Sell the copper for spending money. Leave the exterior of the home pristine and undamaged but wreck utter devastation inside just before you walk away.

      Losing $60,000 per foreclosure isn’t painful enough. It must cost them the full value of the house plus incur costs necessary to rebuild nearly entirely. Fuck the banks.

      1. different clue

        I should have read your comment fully before I chimed in.
        I used to would-have-agreed with your advice. But I have thought about a Holman Jenkins editorial I read in the Wall Street Journal about how the banks should destroy a few million of “their” houses to create a housing shortage to force the price of houses back up. And I believe the banks are often applying Jenkins’s advice in a sub rosa way when they let foreclosed or abandoned houses stay abandoned precisely in order to attract vandals and destruction. Destroyed houses is what the banks want . . . IF they can get enough houses destroyed.

        I would prefer a movement to turn the house over to aggressive Occupy This Old House movement squatters. They might defend the house and maintain its physical value up to some level against the day when majority society is able to force a majority-beneficial solution to the problem.

        1. Doctor Brian Oblivion

          One building in the small apartment complex in which I live received the final Writ of Restitution signed by a Superior Court Judge and delivered by county authorities. Although the tenants had ponied up rent, they essentially had three days to vacate. It sounds like only one of the four units actually received a notice on the door 90 days ago per Federal law.

          It is my understanding that the property is in possession of the bank and that there is no new owner. Temporarily assuming the role of landlord and collecting rent on the property until a buyer could be found and letting the tenants stay in their homes until a sucker, er, investor came along would seem like a better outcome than potentially leaving the property vacant for the foreseeable future. There’s already some now long vacant business property around here.

          The newly vacant building’s ownership was decided “in favor of Mortgage Electronic Registration Systems, Inc. solely as nominee for Lender and Lender’s successors and assigns, as Beneficiary, the beneficial interest in which was assigned by Mortgage Electronic Registration Systems, Inc., “MERS” to The Bank of New York Mellon, fka The Bank of New York as Successor in interest to JP Morgan Chase Bank NA as Trustee for Structured Asset Mortgage Investments II Inc. Bear Stearns ALT-A Trust 2006-2”

          The chain of title would probably make my head hurt.

          1. aletheia33

            what would have happened if all the tenants had stood together and refused to leave–supported by all the neighbors coming around when the enforcers showed up, and your city’s occcupy (if any)?

  42. skinla

    I thought Attorney Generals are also supposed to be lawyers or have law degree. Perhaps law degree is not required to be elected AG. Whenever I called AGs office, I have always wondered about the recording that emphasized that the attorney general cannot give you legal advice, go consult a lawyer.

    Anyway, there should be a way to stop this settlement from happening. If it is possible to file lawsuit against Obama and all the AGs, lawyers should get involved. May be we should raise some money for the lawyers who can sue the hell out of these AGs (lets call them SOBs) and for the PR fight, don’t forget to educate the brats of SOPA PIPA army who are still breathing hot after recent combat.

  43. DavidE

    I watched Suze Orman last night. She told someone who was 200K underwater to default on her mortgage and see what the bank does. That’s what many people who are underwater on their mortgages have to do.

    This deal is almost useless to people who are underwater on their mortgages. What people have to do is use their legal rights. One of those legal rights is to default on the mortgage. That is a good strategy if you don’t have any other assets that the bank can touch or the bank can’t go after you for more than the sales price of the house.

    The stupidity is for the AGs to try and reach an agreement to keep people from defaulting. People should default if it is in their best interest to default. That is what will put pressure on the banks. It is not this stupid lawsuit.

    1. Andrea Psoras

      Because if you’ve been watching accounting standards and financial law and international, multilateral ‘treaties’, technically many of these bank ‘execs’ have done nothing ‘illegal’.

      Much of what they’d done, in their enron OP is/has/had been legitimized and the individual items such as the mortgage ‘robo’ scandal and the re-hypothications all are again legitimized or technically not illegal but certainly are agency abuse and self dealing.

      Prosecution for much of what has happened falls under torte law although there is some corporate law that can handle some of the agency abuse but again that’s complex law.

      That’s more difficult lawyering.

  44. Andrea Psoras

    Gretchen Morgansen quoted Yves Smith on how this is a bailout for the banks. the banks will take the charges and with gov money wont feel the pain. they dont have the money for the write offs or write downs any, but not only are the terms perhaps or those who have to sign off not settled, even if and when they do, that contracts on private property were altered and technically not a bankruptcy framework. this is private property law now at risk like the mangling of private property ownership by way of eminent domain. this continues the process of the hiving away the assets from the hands of the many into the hands of the few.

  45. ebear

    My guess is they were shown the balance sheet – the real balance sheet – and balked at having their names attached to a process that would collapse the US financial system.

    Yes I know, by any rational standard the system is already bankrupt, but these are not rational times. Nonetheless, I’m sure most of these AGs are as capable as I am of understanding the problem, which I’ve been tracking since 2000 when Doug Noland ( first raised the alarm. 12 years later and nothing’s really changed.

    1. wb ellis

      shock after seeing the actual balance sheets might be an explanation for the bizarre AG behavior — except they could do the math showing how very small the 25bn amt is in face of a 700bn neg equity problem.
      Which makes me still very curious on precisely what (on earth) has incentivized this collection of battle-trained legal warriors to roll-over on this issue, and to roll-over so visibly to the public, and their state residents. It’s an odd exposure for them to (all) take on, and i assume their success in getting the job they’re in depended a lot on their ability to avoid vulnerabilities just like this. So this is a big deal, and sort of begs a follow-up explanation of what force of unseen circumstances made this ugly outcome seem somehow “preferred”?

      1. ajax

        I’m rather doubtful that citizens in a non-official
        capacity have standing her before the US District court.

        In high-stakes (and other) cases, some orgnizations file
        “friend of the court” legal briefs (amicus briefs).

        Then, in the trial of I. Lewis “Scooter” Libby, many
        citizens wrote letters of praise to the Judge, saying
        that Libby was a very nice, very educated man.

  46. Bravo

    An earlier post, suggested that the premature announcement of the settlement was intended to put dissenting Attorney Generals in the position where they might potentially have to defend their non-participation in the deal to the public. This could be a huge political opportunity for an aspiring Attorney General to get out in front of the outrage and actually exhibit leadership for a change….can you imagine an Attorney General with the conviction and integrity to be truthful and make the following points:

    In our state, we believe that fabricating foreclosure documents is far more serious an offense than a $2,000 fine would suggest, particularly given that the crimes being committed were by those very institutions who contributed greatly to the on-going national foreclosure disaster.

    With 11 million homeowners under water nationwide to the tune of about $700 billion ($63,640 average), we believe that the proposed principal modifications will be of insufficient scope to alter most foreclosure outcomes, except to make it easier for 1st lien holders to foreclose on properties for which they currently lack legal standing to do so. In our view, this settlement has the makings of a “bribes for deeds” bailout plan for the banks, more so than relief for homeowners.

    Where big bank owned 2nd liens are behind securitized 1st liens in terms of priority, the deal as allegedly struck, amounts to a stealth transfer of prospective big bank 2nd lien loan losses, to investors in the mortgage backed securities that allegedly own the 1st liens (pension plans, 401k’s, the Fed). Part of our remaining investigation will be to determine if the investors in the 1st lien positions do in fact possess the legal standing to foreclose, as was represented to them when they bought their interests in the mortgage backed securities.

    In our state, we have a policy not to announce settlements of any cases, much less high profile ones, until such time as all parties have signed off on them. We believe the administration’s actions were premature.

  47. freedomny

    I believe this is the time for the “average” American to be educated…politics 101…economics 101…democracy 101.

    But the average American these days is so beaten down by their everyday existence, that they choose to use their 2 or 3 hours of free time to numb themselves by watching reality tv. And, who can blame them? I’m guilty as well.

    The message of what has happened, and continues to happen, needs to be main street and understandable. Politicians will not do it because they are part of the problem.

    OWS is a start…but it has been maligned by elite media. I am hoping that we can all offer whatever expertise and knowledge we have to help educate Americans and fine point clear messages…and a clear intent for the future.

    So Yves – this is my challenge to you. I respect. I get it. But, I would actually like it if you could…yeah…stop blogging…or blog and do something bigger. You were quoted in the NYT’s today in G.M’s opt ed.
    Obv people take what you say seriously. But, it’s got to be something more.

    A Naked Capitalism Summit? Just how interesting would it be to get NC posters, G.M, Rev. Sharpton, S. Johnson, Dylan R, Matt T, Bill Moyers, and others in one room? Just a thought…a strategy…and of course a challenge….

    I would be IN.


      1. freedomny

        ajax – not terribly optimistic of you…and you can’t fight the good fight without being optimistic…and hopeful. Funding can be had. But the ideas have to be put out there. I think you would be surprised how hungry people are for some real change…quelle surprise…even people with…money…

      2. freedomny

        Yes kris – because Sharpton has access to churches all over the place. Not only a great place to educate folks, but a strong community. What don’t you like about that? A bit elitist of you…no offense.

        Oh – btw. Maybe you don’t know this, but many of the subprime loans originated by banks in lower income areas came about by originators who specifically “worked” the churches.

        So why not help make a wrong a right?


  48. wb ellis

    Great article, thx.

    But doesnt seem right to awkwardly stuff the entire housing crisis phenomenon into a tidy story about good vs evil. banks/lenders share the blame but surely hold no monopoly on it.
    remember how much we need our freedom of choice, self-determination, free will, etc. If we reject the accountability related to an individual’s choice to borrow a loan, isn’t there some sort of collateral damage to the free choice being made? freedom of choice needs to attach to accountability for the its consequences. borrowers arent strictly victims, and lenders arent strictly the ones we get to blame.

    1. different clue

      Some of the borrowers were cynical house-flippers who share moral blame with the cynical lenders. Others were semi-educated or dull-normal marks who are much less blameworthy than the sharp carnies who conned them with predatory loans. And there was a whole conspiracy of predatory lending to whole classes of simple marks.

      And downstream, the credit rating agencies, for example, lied about the safety and value of the Synthetic MultiMortgage Securities, to help the sharpie banks and others sell these securities to simple rube pension funds and the like. Who is more culpable? Who is more worthy of functional “extermination” here?

      1. wb ellis

        think you give too much credit to how sharp bankers are.  A conspiracy needs to have some sort of centralized organizing principle, some committee of bad guys that have a devilish goal, talk about it together and strategize their secret ploy to achieve it.   You wont find it here.  Think of the “sharp carnies” as ants in an ant farm, each given some narrow set of marching orders, who will doggedly go accomplish precisely those orders and get paid well for it.
        There was no “Queen” banker, or committee of doom that had the will or power to give direction to all the chaos.  It was a result of millions of players in finance doing their own myopic thing.  At least ants are (i guess) colluding toward some common good, but bankers are notoriously not, and their game is maybe to kill each other….  

        Just as each banker was myopic, motivated and self-interested, each borrower was equally so.  i don’t concede that the avg banker was all that sharp, just like I dont concede the avg borrower wasnt.

        1. enouf

          “think you give too much credit to how sharp bankers are.” — wb ellis

          um.., they’re known as Bank’sters’ for a reason ;-)

          (think gangsters, cartel, collusion, mafiaso … heck, loosely knit global financial tewworistas–the 0.01%)

          Anyways, History has repeatedly shown that; “all that needs for evil to thrive, is for good men to do nothing”.

          Unfortunately we’ve been weened on a short attention-span disorder, …through … yep, the TV! ..who would’ve thought? :0

          “Permit me to issue and control the money of a nation, and I care not who makes its laws!” –
          (quote from;

          Do you REALLY believe the Medeival Age (Dark) has ever ended? What came in the prior to this darkness?

          (In general terms) I’m talking about what is in Mankind’s Heart


          1. enouf


            I said;
            (think gangsters, cartel, collusion, mafiaso … heck, loosely knit global financial tewworistas–the 0.01%)

            I forgot to mention the “that begs the question” of what supposed ‘Al Qaeda’ is/does/desires/operates , doesn’t it?

            WAIT! — Let’s All Go SHOPPING! — G.W.Bush

            Love ; begrudgingly

  49. Greg

    Homeowners bought and banks lent on overvalued properties; now the correction in value. Homeowners lost their equity; banks, however, still insist on getting their overvalued mortgage dollars.
    How about this: Banks should be required to obtain current appraisal of those properties; homeowner would have right to challenge the appraisal’s fair market value by getting their own appraisal; split the difference or expidite arbitration, take your pick.
    Once FMV is set, banks reduce mortgage principal to 90% of FMV, and apply all prior principal payments to further reduce that 90%;
    modify interest to current local rate – set a floor and a ceiling.
    homeowner chooses 10, 15, 20, 25 or 30 year amortization.
    2nd mortgages go away.
    everyone pays for this folly.

    1. wb ellis

      that would be nice outcome, but trouble is getting there. There’s a huge loss to burn through first. And some amt that some party or parties needs to absorb to effect the 90%
      party, or parties will need to absorb the huge loss sitting unannounced on bank/lender books. parties or get from here to a new <=90% loan value loss or write off amount that's gotta be brequired by some party, parties, people, etc is lik

      1. Greg

        We’re talkinga about non-performing loans. Non-payers are sitting in their homes, literally rent free, for years now. If the bank, after all the months, if not years, of carrying the property – paying taxes and lawyers in foreclosure, finally gets to the FC sale, without the homeonwer declaring bankruptcy, most likely they will only get the FMV (if that) at auction. 90% gives the homeonwer an equity stake in the home again.
        This cuts the banks carrying costs; frees the court system from the overburden of these suits; gets the loan back to performing. As the article says, Banks, being interested in only $$$$, still aren’t playing fair. The govt can then seek to impose fines and other penalties on the banks for their role in fostering this fiasco.

        1. wb ellis

          i appreciate your rationale entirely.
          1.  I understand how freeloading behavior seems so morally objective, but It’s not about morality here, but rather pure economic self-interest…   a family needs to do what’s in its best interest within confines of law.  Freeloading qualifies, esp if family is stuck in a house, where it simply hasn’t the cash to write a make-whole check to bank to escape the obligation, sell an unaffordable home, and move on to more responsible way of living.  they cant save themselves.    
          2.  on the 90% idea, I can’t tell who’s supposed to “eat” the mark-downs.  do you have each bank editing the loan contract, scratching off existing $principal due, and replacing w 90% amt?  That’s fine, but just need to say that this is now the bank’s real (realized) loss, to show up next financial statement.   Add each of these scratch-offs together and I believe youre talking about an $1trillion shock to US banking overnight.   US banking cant survive that.   Any hope of burning through this amount of losses will probably need to be gradual, and staggered.   

          1. enouf

            1. I understand how freeloading behavior … — wb ellis

            Apologies, but i refuse to interact with you further, as you’ve established in such short words how the “Welfare Queen of War” thrives.

            Thank you


          2. wb ellis


            I feel no sense of push-back reading your thoughtful “refusal”, and will honor it.

            only wrinkle is being unable to find the item anywhere on any of my lists to simply cross it off.

  50. camelotkidd


    Is it true, as Pam Martens maintains, that one of the reasons for not prosecuting the 5 TBTF banks is that they are the primary dealer who contractually agree to buy Treasury bills?

      1. kris

        US Treasury and US Fed seem to be hungry to add to primary dealers. Check the new list. Basically 4 or 5 of 6 major canadian banks are now primary dealers. Here, in Canada nobody talked about it, zero, nada, zilch.
        It looks to me that besides MF Crap, there are other primary dealers coming up for decimation.

        1. enouf

          Please define: “Treasury Bill” and all the FIAT minutiae that presumes, thanks

          — and then please describe the differences, if any, especially v. Treasury Bond (or even Note) — thank you


  51. b.

    I very much like Yves’ LAT “price tag for fraud” comment (although LAT of course avoided to step from costs to profits), and Barry Ritzholtz’ “political solution to math”, but pretty much all the commentary is missing the most important part of this mess: The ongoing destruction of the very notion of residential property. As YS commented in a recent article, the world we are approaching is one where you could, over decades, pay back a mortgage to the wrong corporation, and will have to spent decades trying to recover your money from some corps’ profitable bankruptcy, after you have been foreclosed upon.

    The investment version of this same issue: MF Global.

    The “End of Wall Street” article contained this gem:

    “We used to rely on the public making dumb investing decisions,” one well-known Manhattan hedge-fund manager told me. “but with the advent of the public leaving the market, it’s just hedge funds trading against hedge funds. At the end of the day, it’s a zero-sum game.”

    It looks like whether or not this massive move from “rule of law to rule of larceny” is going to succeeed will depend on the extent to which the many can be forced to “play the game”. Note that many proposals – such as negative interest, limits on moving from 401(k) to IRAs, student loans, or the evisceration of Social Security – are ultimately about maintaining the 80+ percent to remain inside a structure rigged to extract profits from mandated and voluntary savings. The purpose of the government has become the delivery of taxpayers for profit extraction by private corporations. *That* is the haltch insurance mandate in a nutshell. It is the logical next step of crony capitalism: The system cannot turn a profit it it runs out of marks.

    1. b.

      “health insurance”. And mortage “restructuring” is an example of extracting profits from debt, which is a form of mandated savings, really.

  52. b.

    “This deal a robosettlement. Just like its namesake, it’s more about getting it done than doing it right.”


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