Cross-posted from Smirking Chimp
It's time to start helping the people, and stop helping Wall Street.
According to an agreement announced earlier today, big bank Citigroup will pay $7 billion to settle a Department of Justice investigation into that bank's involvement with risky subprime mortgages.
The agreement stems from Citigroup's role in the trading of subprime mortgage securities, which helped to cause the 2007 financial collapse and Great Recession.
Of the $7 billion total settlement, $4 billion will be in the form of a civil monetary payment to the Department of Justice, $500 million will go to state attorney's general and the Federal Deposit Insurance Corporation, and an additional $2.5 billion will go towards "consumer relief."
But make no mistake about it. This agreement is another win for the big banks.
Under the agreement, Citigroup will most likely get a $500 million tax write-off. And in pre-market trading on Monday, Citigroup stocks rose by nearly 4 percent, despite the $7 billion agreement.
This is nothing more than a slap on the wrist for Citigroup; basically a cost of doing business.
And as for the mere $2.5 billion in consumer relief, while it will be going towards loan modifications, principal reduction and refinancing for distressed homeowners, it's nowhere near enough. And there are no guarantees it will make its way into the hands of the people Citigroup victimized, either.
If the Department of Justice was serious about holding Citigroup accountable for its actions, and helping the American people and economy recover from the Great Recession, then it would be taking a heck of a lot more than $7 billion, and giving that money directly to the American people.
It would be helping out American homeowners, instead of continuing to protect the big banks.
After all, it's consumers buying things like houses who drive demand and grow the economy. Not the big banks on Wall Street.
Directly helping out American homeowners after a crisis isn't some sort of radical idea or new thing we have to look at Sweden or Iceland to figure out, either.
We've done this sort of thing before, right here in the United States, and it worked very well.
Back in 1933, in the wake of the Great Depression, FDR signed into law the Home Owners' Loan Act of 1933, which created the Home Owners' Loan Corporation (HOLC).
The HOLC's main goal was to help refinance home mortgages that were in default or at risk of foreclosure because of the 1929 stock market crash and the previous collapse of the housing industry.
It did that by buying up old mortgages from the banks using government bonds -- borrowed money.
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