Now the Wall Street Journal reports that $7 billion to $8 billion from the Bank of America deal will be allocated for "consumer relief, such as reducing mortgage balances for struggling homeowners," while $9 billion will go to "the federal government, states and other government entities."
Only the $9 billion is a sure thing -- and most of that money will go to government agencies that have a poor record of providing relief to wronged homeowners.
What's more, it hasn't been announced whether this deal, like Citigroup's recent settlement, will be tax-deductible. If so, Americans will get shortchanged at the federal level, too.
Repeat Offenders
Worst of all, nothing in these settlements is likely to dissuade bankers from engaging in similar misadventures in the future. When the New York Times studied bank settlements several years ago, it found that banks routinely violated the pledges they made in agreements like these.
Bank of America had engaged in six repeat violations as of November 7, 2011. Since then it's been a party to mortgage-related settlements that include the (allegedly) $25 billion foreclosure fraud deal; a $9.3 billion multi-bank settlement in 2013; and an $8.5 billion agreement with a group of mortgage investors it had defrauded.
Many deals with other big banks were also struck during that time. But there have been no criminal prosecutions of big-bank executives, an omission that Federal Judge Jed S. Rakoff lamented in a recent speech. Rakoff called the lack of prosecutions from the Justice Department and the Securities and Exchange Commission "technically and morally suspect" and characterized the excuses they've given for failing to prosecute as "hollow" and "lame."
Where's the deterrence?
Adult Swim
Thanks to Judge Rakoff, who has been one of the unsung heroes of the fight for financial justice, the number of big-bank executives who have been held financially responsible for their fraud no longer stands at zero. The judge recently ordered Rebecca Steele Mairone of Countrywide and Bank of America to pay $1 million for her role in the fraudulent Countrywide scheme known as "Hustle."
As reported in The Street and elsewhere, the name "Hustle" came from the acronym for a program Countrywide called the "High Speed Swim Lane." (We apologize for The Street's headline, which depicts Mairone as a "blonde go-getter," but look forward to its characterization of Bank of America CEO Brian Moynihan as a "hard-charging redhead.")
Congratulations to Judge Rakoff for holding a banker personally liable at last. But here's the problem: Mairone is only one of many fraudsters in the banking industry -- and a fine is not a criminal indictment. More than a thousand bankers were convicted after the much smaller savings and loan scandal of the 1980s. At this rate most bankers -- a risk-taking bunch by nature anyway -- will be tempted to take their chances on not getting a crusading judge like Rakoff.
After all, what's the worst that could happen: that they might have to give back some of their ill-gotten gains? What fraudster wouldn't take a bet like that?
Means, Motive, and Opportunity
Yes, the settlement figures have grown larger, even after accounting for the vaporous nature of "soft money" consumer relief. That's a good thing. But the key matters of motive, means and opportunity still remain largely unaddressed.
The "High Speed Swim Lane" was designed to streamline fraud, and to reward employees for putting as much trashy business on the books as possible without regard for the consequences. In other words, it simply stated openly what has always been implicit in Wall Street's incentive packages. Those packages are changing, but far too slowly. Bankers still have the financial motivation to do wrong.
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